--- ticker: COST company: Costco Wholesale Corporation filing_type: 10-K year_current: 2024 year_prior: 2023 risks_added: 3 risks_removed: 1 risks_modified: 37 risks_unchanged: 36 source: SEC EDGAR url: https://riskdiff.com/cost/2024-vs-2023/ markdown_url: https://riskdiff.com/cost/2024-vs-2023/index.md generated: 2026-06-01 --- # Costco Wholesale Corporation: 10-K Risk Factor Changes 2024 vs 2023 > Source: U.S. Securities and Exchange Commission (EDGAR) > Generated: 2026-06-01 > All data extracted directly from official filings. No hallucinated content. ## Summary | Status | Count | |--------|-------| | New risks added | 3 | | Risks removed | 1 | | Risks modified | 37 | | Unchanged | 36 | --- ## New in Current Filing: Failure or perceived failure to meet our ESG goals or expectations set by growing public interest and government regulation of ESG topics could result in reputational harm or adversely affect our business Costco has set public targets and disclosed intentions for future action regarding sustainability. There are dependencies outside of our control impacting our ability to meet our goals, including but not limited to: economic conditions, ability to access technology at an appropriate cost or scale, the ability to procure sufficient clean energy at competitive market rates to meet future operational and supplier needs, unforeseen operational and implementation challenges, termination or contraction of policies or systems which support our capital investments, and collaboration with third parties. We may not make adequate and timely investments or successfully implement strategies that will effectively achieve our sustainability-related goals, which could lead to reputational harm with members and other stakeholders. 17 17 17 Table of Contents Table of Contents --- ## New in Current Filing: Risk Management and Global Strategy We have implemented processes, technologies, and controls to seek to assess, identify, and manage risks associated with cybersecurity threats. Management considers cybersecurity risks within our overall approach to enterprise risk management. We evaluate these risks based on several frameworks, including the National Institute of Standards and Technology (NIST) Cybersecurity Framework (CSF), Center for Internet Security (CIS) 18 Critical Security Controls, and the Payment Card Industry Data Security Standard (PCI DSS). Our governance policies, including our Information Security Policy, outline high-level objectives designed to meet compliance and regulatory requirements. We undertake a bi-annual NIST CSF and CIS 18 Critical Security Controls assessment, conducted by a third-party, to measure our program maturity. We have implemented a variety of technologies, leveraging third-party security providers for some, and engage in multiple activities to seek to identify and mitigate vulnerabilities and risks in systems. These include, among other activities, scanning for common vulnerabilities and exposures, penetration tests on internal and external networks, code scans on applications, allowed application listing, configuration management tools, employee awareness and training, and internal and external audits. We also review, with various frequencies, on a risk-based priority select third parties with whom we do business, in an effort to reduce the likelihood of security incidents or business interruptions. We maintain cybersecurity insurance that would apply to certain losses arising from significant security incidents. We maintain a security operations center, supported by external providers and our employees, which provides threat detection and incident response capabilities. We maintain cyber incident response plans and related playbooks, for execution by our information security team, in coordination with stakeholders (including legal counsel). Significant incidents will be escalated to a Cybersecurity Materiality Committee to assess materiality based on qualitative and quantitative factors. The Committee is composed of a cross-divisional group of executives representing the core business functions of Information Technology and Security, Operations, Administration, Finance and Accounting, and Legal. We conduct periodic tabletop exercises, including at the executive level, to test our response processes and incident management procedures. 18 18 18 Table of Contents Table of Contents Governance Our Board of Directors has delegated certain responsibilities to the Audit Committee of the Board. The Audit Committee reviews and discusses with management the identification and mitigation of cybersecurity risks, including (among other things) the effectiveness of risk-management policies and practices designed to help safeguard our operations, financial systems, and data. Our Vice President of Information Security and Chief Information Security Officer (CISO) presents cybersecurity-related topics, including program maturity progress, regularly to the Audit Committee. The Internal Audit team, in its periodic compliance and risk assessment updates to the Audit Committee, also reports on its reviews of certain of our cybersecurity risk exposures, controls, and management actions. The full Board also receives cybersecurity evaluations from time to time. Our information security organization is led by our CISO, who has over eighteen years of relevant experience, serving in leadership roles across the retail and technology sectors. The CISO is responsible for all aspects of our cybersecurity program, including cybersecurity engineering and architecture, cybersecurity operations, incident response, threat intelligence, identity and access management, cybersecurity risk and compliance, and vulnerability management. Our CISO reports to our Chief Information and Digital Officer (CIDO), who has more than thirty years' experience in which he has led global digital responsibilities, including leading global cyber teams. Our CIDO reports to the Chief Executive Officer. --- ## New in Current Filing: Risks from Material Cybersecurity Threats We and our third-party service and merchandise providers have experienced cybersecurity incidents and threats. Based on the information available as of the date of this Form 10-K, we are not aware of any risks from actual cybersecurity incidents that have materially affected us or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition. It is possible that there have been intrusions into our systems that have not been identified by our controls and procedures and that might manifest in significant events at a later time. There can be no guarantee that the actions and controls we and our third-party service providers have implemented and are implementing will be sufficient to protect our systems, information or other property. See "Risk Factors" in Item 1A of this Form 10-K for more information on our cybersecurity-related risks. Item 2 - Properties --- ## No Match in Current: Factors associated with climate change could adversely affect our business. *This section from the 2023 filing does not have a high-confidence textual match in 2024. It may have been removed, merged, or substantially reworded.* We use natural gas, diesel fuel, gasoline, and electricity in our distribution and warehouse operations. Government regulations limiting carbon dioxide and other greenhouse gas emissions and other environmental restrictions may increase compliance and merchandise costs, and other regulation affecting energy inputs could materially affect our profitability. As the economy transitions to lower carbon intensity we cannot guarantee that we will make adequate investments or successfully implement strategies that will effectively achieve our climate-related goals, which could lead to negative perceptions among members and other stakeholders and result in reputational harm. Climate change, extreme weather conditions, wildfires, droughts and rising sea levels could affect our ability to procure commodities at costs and in quantities we currently experience. We also sell a substantial amount of gasoline, the demand for which could be impacted by concerns about climate change and increased regulations. More stringent fuel economy standards, changing public policies aimed at increasing the adoption of zero-emission and alternative fuel vehicles and other regulations related to climate change, and evolving consumer preferences will affect our future operations and will adversely impact certain elements of our profitability and require significant capital expenditures. 15 15 15 Table of Contents Table of Contents --- ## Modified: LIQUIDITY AND CAPITAL RESOURCES **Key changes:** - Reworded sentence: "The following table summarizes our significant sources and uses of cash and cash equivalents: 202420232022Net cash provided by operating activities$11,339 $11,068 $7,392 Net cash used in investing activities(4,409)(4,972)(3,915)Net cash used in financing activities(10,764)(2,614)(4,283) Our primary sources of liquidity are cash flows from operations, cash and cash equivalents, and short-term investments." - Reworded sentence: "Changes in foreign exchange rates impacted cash and cash equivalents positively by $40 and $15 in 2024 and 2023, and negatively by $249 in 2022." - Reworded sentence: "See Notes 4 and 5 to the consolidated financial statements included in Item 8 of this Report for amounts outstanding on September 1, 2024, related to debt and leases." - Reworded sentence: "We believe that our cash and investment position and operating cash flow, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future and our U.S." **Prior (2023):** The following table summarizes our significant sources and uses of cash and cash equivalents: 202320222021Net cash provided by operating activities$11,068 $7,392 $8,958 Net cash used in investing activities(4,972)(3,915)(3,535)Net cash used in financing activities(2,614)(4,283)(6,488) 25 25 25 Table of Contents Table of Contents Our primary sources of liquidity are cash flows from operations, cash and cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments were $15,234 and $11,049 at September 3, 2023, and August 28, 2022. Of these balances, unsettled credit and debit card receivables represented $2,282 and $2,010. These receivables generally settle within four days. Changes in foreign exchange rates impacted cash and cash equivalents positively by $15 and $46 in 2023 and 2021, and negatively by $249 in 2022. Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, leases, and construction and land purchase obligations. See Notes 4 and 5 to the consolidated financial statements included in Item 8 of this Report for amounts outstanding on September 3, 2023, related to debt and leases. Purchase obligations consist of contracts primarily related to merchandise, equipment, and third-party services, the majority of which are due in the next 12 months. Construction and land-purchase obligations consist of contracts primarily related to the development and opening of new and relocated warehouses, the majority of which (other than leases) are due in the next 12 months. Management believes that our cash and investment position and operating cash flows, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future. We believe that our U.S. current and projected asset position is sufficient to meet our U.S. liquidity requirements. **Current (2024):** The following table summarizes our significant sources and uses of cash and cash equivalents: 202420232022Net cash provided by operating activities$11,339 $11,068 $7,392 Net cash used in investing activities(4,409)(4,972)(3,915)Net cash used in financing activities(10,764)(2,614)(4,283) Our primary sources of liquidity are cash flows from operations, cash and cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments were $11,144 and $15,234 at September 1, 2024, and September 3, 2023. Of these balances, unsettled credit and debit card receivables represented approximately $2,519 and $2,282. These receivables generally settle within four days. Changes in foreign exchange rates impacted cash and cash equivalents positively by $40 and $15 in 2024 and 2023, and negatively by $249 in 2022. Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term debt and related interest payments, leases, and construction and land purchase obligations. See Notes 4 and 5 to the consolidated financial statements included in Item 8 of this Report for amounts outstanding on September 1, 2024, related to debt and leases. Purchase obligations consist of contracts primarily related to merchandise, equipment, and third-party services, the majority of which are due in the next 12 months. Construction and land-purchase obligations consist of contracts primarily related to the development and opening of new and relocated warehouses, the majority of which (other than leases) are due in the next 12 months. We believe that our cash and investment position and operating cash flow, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future and our U.S. current and projected asset position is sufficient to meet our U.S. liquidity requirements. --- ## Modified: Note 4 - Debt **Key changes:** - Reworded sentence: "Short-Term Borrowings The Company maintains various short-term bank credit facilities, with a borrowing capacity of $1,198 and $1,234, in 2024 and 2023." - Reworded sentence: "In November 2023, the Company's Japan subsidiary issued four Guaranteed Senior Notes, totaling approximately $500, at fixed interest rates ranging from 1.400% to 2.120%." **Prior (2023):** Short-Term Borrowings The Company maintains various short-term bank credit facilities, with a borrowing capacity of $1,234 and $1,257, in 2023 and 2022. Short-term borrowings outstanding were immaterial at the end of 2023 and 2022. Long-Term Debt The Company's long-term debt consists primarily of Senior Notes, described below. The Company at its option may redeem the Senior Notes at any time, in whole or in part, at a redemption price plus accrued interest. The redemption price is equal to the greater of 100% of the principal amount or the sum of the present value of the remaining scheduled payments of principal and interest to maturity. Additionally, upon certain events, a holder has the right to require a repurchase at a price of 101% of the principal amount plus accrued and unpaid interest. Interest on all outstanding long-term debt is payable semi-annually. The estimated fair value of Senior Notes is valued using Level 2 inputs. Other long-term debt consists of Guaranteed Senior Notes issued by the Company's Japanese subsidiary, valued using Level 3 inputs. In May 2023, the Japanese subsidiary repaid $75 of its Guaranteed Senior Notes. At the end of 2023 and 2022, the fair value of the Company's long-term debt, including the current portion, was approximately $5,738 and $6,033. The carrying value of long-term debt consisted of the following: 202320222.750% Senior Notes due May 2024$1,000 $1,000 3.000% Senior Notes due May 20271,000 1,000 1.375% Senior Notes due June 20271,250 1,250 1.600% Senior Notes due April 20301,750 1,750 1.750% Senior Notes due April 20321,000 1,000 Other long-term debt484 590 Total long-term debt6,484 6,590 Less unamortized debt discounts and issuance costs26 33 Less current portion(1)1,081 73 Long-term debt, excluding current portion$5,377 $6,484 2.750% Senior Notes due May 2024 3.000% Senior Notes due May 2027 1.375% Senior Notes due June 2027 1.600% Senior Notes due April 2030 1.750% Senior Notes due April 2032 Less current portion(1) _______________ (1)Net of unamortized debt discounts and issuance costs. Maturities of long-term debt during the next five fiscal years and thereafter are as follows: 2024$1,081 2025103 202676 20272,250 2028 - Thereafter2,974 Total$6,484 Thereafter Total 49 49 49 Table of Contents Table of Contents **Current (2024):** Short-Term Borrowings The Company maintains various short-term bank credit facilities, with a borrowing capacity of $1,198 and $1,234, in 2024 and 2023. Short-term borrowings outstanding were immaterial at the end of 2024 and 2023. Long-Term Debt The Company's long-term debt consists primarily of Senior Notes, described below. The Company at its option may redeem the Senior Notes at any time, in whole or in part, at a redemption price plus accrued interest. The redemption price is equal to the greater of 100% of the principal amount or the sum of the present value of the remaining scheduled payments of principal and interest to maturity. Additionally, upon certain events, a holder has the right to require a repurchase at a price of 101% of the principal amount plus accrued and unpaid interest. Interest on all outstanding long-term debt is payable semi-annually. The estimated fair value of Senior Notes is valued using Level 2 inputs. Other long-term debt consists of Guaranteed Senior Notes issued by the Company's Japanese subsidiary, valued using Level 3 inputs. In November 2023, the Company's Japan subsidiary issued four Guaranteed Senior Notes, totaling approximately $500, at fixed interest rates ranging from 1.400% to 2.120%. Interest is payable semi-annually, and maturity dates range from November 7, 2033, to November 7, 2043. In July 2024, the Japanese subsidiary repaid $77 of its Guaranteed Senior Notes. On May 18, 2024, the Company paid the $1,000 outstanding principal balance and interest on the 2.750% Senior Notes using cash and cash equivalents and short-term investments. At the end of 2024 and 2023, the fair value of the Company's long-term debt, including the current portion, was approximately $5,412 and $5,738. The carrying value of long-term debt consisted of the following: 202420232.750% Senior Notes due May 2024$ - $1,000 3.000% Senior Notes due May 20271,000 1,000 1.375% Senior Notes due June 20271,250 1,250 1.600% Senior Notes due April 20301,750 1,750 1.750% Senior Notes due April 20321,000 1,000 Other long-term debt919 484 Total long-term debt5,919 6,484 Less unamortized debt discounts and issuance costs22 26 Less current portion(1)103 1,081 Long-term debt, excluding current portion$5,794 $5,377 _____________ 2.750% Senior Notes due May 2024 3.000% Senior Notes due May 2027 1.375% Senior Notes due June 2027 1.600% Senior Notes due April 2030 1.750% Senior Notes due April 2032 Less current portion(1) (1)Net of unamortized debt discounts and issuance costs. Net of unamortized debt discounts and issuance costs. 51 51 51 Table of Contents Table of Contents Maturities of long-term debt during the next five fiscal years and thereafter are as follows: 2025$103 202676 20272,250 2028 - 2029150 Thereafter3,340 Total$5,919 Thereafter Total --- ## Modified: We may not timely identify or effectively respond to consumer tastes and preferences, which could negatively affect our relationship with our members, the demand for our products and services, and our market share. **Key changes:** - Reworded sentence: "Failure to identify timely or effectively respond to changing consumer tastes, preferences and spending patterns including those related to resource efficiency, environmental protection, human rights, and the transition to a low-carbon economy could negatively affect our relationship with our members, the demand for our products and services, and our market share." **Prior (2023):** It is difficult to consistently and successfully predict the products and services that our members will desire. Our success depends, in part, on our ability to identify and respond to trends in demographics and consumer preferences. Failure to identify timely or effectively respond to changing consumer tastes, preferences (including those relating to environmental, social and governance practices) and spending patterns could negatively affect our relationship with our members, the demand for our products and services, and our market share. If we are not successful at predicting our sales trends and adjusting our purchases accordingly, we may have excess inventory, which could result in additional markdowns, or we may experience out-of-stock positions and delivery delays, which could result in higher costs, both of which would reduce our operating performance. This could have an adverse effect on net sales, gross margin and operating income. **Current (2024):** It is difficult to consistently and successfully predict the products and services that our members will desire. Our success depends, in part, on our ability to identify and respond to trends in demographics and consumer preferences. Failure to identify timely or effectively respond to changing consumer tastes, preferences and spending patterns including those related to resource efficiency, environmental protection, human rights, and the transition to a low-carbon economy could negatively affect our relationship with our members, the demand for our products and services, and our market share. We sell a substantial amount of gasoline, the demand for which could be impacted by concerns and regulation about climate change. If we are not successful at predicting our sales trends and adjusting our purchases accordingly, we may have excess inventory, which could result in additional markdowns, or we may experience out-of-stock positions and delivery delays, which could result in higher costs, both of which would reduce our operating performance. This could have an adverse effect on net sales, gross margin and operating income. --- ## Modified: (amounts in millions) **Key changes:** - Reworded sentence: "Common StockAdditionalPaid-inCapitalAccumulatedOtherComprehensiveIncome (Loss)RetainedEarningsTotal CostcoStockholders'EquityNoncontrollingInterestsTotalEquity Shares (000's)AmountBALANCE AT AUGUST 29, 2021441,825 $4 $7,031 $(1,137)$11,666 $17,564 $514 $18,078 Net income - - - - 5,844 5,844 71 5,915 Foreign-currency translation adjustment and other, net - - - (686) - (686)(35)(721)Stock-based compensation - - 728 - - 728 - 728 Release of vested restricted stock units (RSUs), including tax effects1,702 - (363) - - (363) - (363)Dividend to noncontrolling interest - - - - - - (208)(208)Acquisition of noncontrolling interest - - (499)(6) - (505)(337)(842)Repurchases of common stock(863) - (15) - (427)(442) - (442)Cash dividends declared and other - (2)2 - (1,498)(1,498) - (1,498)BALANCE AT AUGUST 28, 2022442,664 2 6,884 (1,829)15,585 20,642 5 20,647 Net income - - - - 6,292 6,292 - 6,292 Foreign-currency translation adjustment and other, net - - - 24 - 24 - 24 Stock-based compensation - - 778 - - 778 - 778 Release of vested RSUs, including tax effects1,470 - (303) - - (303) - (303)Repurchases of common stock(1,341) - (24) - (653)(677) - (677)Cash dividends declared and other - - 5 - (1,703)(1,698)(5)(1,703)BALANCE AT SEPTEMBER 3, 2023442,793 2 7,340 (1,805)19,521 25,058 - 25,058 Net income - - - - 7,367 7,367 - 7,367 Foreign-currency translation adjustment and other, net - - - (23) - (23) - (23)Stock-based compensation - - 822 - - 822 - 822 Release of vested RSUs, including tax effects1,337 - (315) - - (315) - (315)Repurchases of common stock(1,004) - (18) - (680)(698) - (698)Cash dividends declared - - - - (8,589)(8,589) - (8,589)BALANCE AT SEPTEMBER 1, 2024443,126 $2 $7,829 $(1,828)$17,619 $23,622 $ - $23,622 Net income Foreign-currency translation adjustment and other, net Stock-based compensation Release of vested restricted stock units (RSUs), including tax effects Repurchases of common stock Net income Foreign-currency translation adjustment and other, net Stock-based compensation Release of vested RSUs, including tax effects Repurchases of common stock Net income Foreign-currency translation adjustment and other, net Stock-based compensation Release of vested RSUs, including tax effects Repurchases of common stock The accompanying notes are an integral part of these consolidated financial statements.39 The accompanying notes are an integral part of these consolidated financial statements.39 The accompanying notes are an integral part of these consolidated financial statements." **Prior (2023):** 53 Weeks Ended52 Weeks Ended52 Weeks Ended September 3,2023August 28,2022August 29,2021NET INCOME INCLUDING NONCONTROLLING INTERESTS$6,292 $5,915 $5,079 Foreign-currency translation adjustment and other, net24 (721)181 Comprehensive income6,316 5,194 5,260 Less: Comprehensive income attributable to noncontrolling interests - 36 93 COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO$6,316 $5,158 $5,167 **Current (2024):** 52 Weeks Ended53 Weeks Ended52 Weeks Ended September 1,2024September 3,2023August 28,2022NET INCOME INCLUDING NONCONTROLLING INTERESTS$7,367 $6,292 $5,915 Foreign-currency translation adjustment and other, net(23)24 (721)Comprehensive income7,344 6,316 5,194 Less: Comprehensive income attributable to noncontrolling interests - - 36 COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO$7,344 $6,316 $5,158 --- ## Modified: Cash Flows from Operating Activities **Key changes:** - Reworded sentence: "Net cash provided by operating activities totaled $11,339 in 2024, compared to $11,068 in 2023." - Reworded sentence: "Cash flow used in operations generally consists of payments to merchandise suppliers, warehouse operating costs, including wages and employee benefits, utilities, credit and debit card processing fees, and operating leases." - Reworded sentence: "Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, payment terms with suppliers, and early payments to obtain discounts." **Prior (2023):** Net cash provided by operating activities totaled $11,068 in 2023, compared to $7,392 in 2022. Our cash flow provided by operations is primarily from net sales and membership fees. Cash flow used in operations generally consists of payments to merchandise suppliers, warehouse operating costs, including payroll and employee benefits, utilities, and credit and debit card processing fees. Cash used in operations also includes payments for income taxes. Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, the forward deployment of inventory to accelerate delivery times, payment terms with suppliers, and early payments to obtain discounts. **Current (2024):** Net cash provided by operating activities totaled $11,339 in 2024, compared to $11,068 in 2023. Our cash flow provided by operations is primarily from net sales and membership fees. Cash flow used in operations generally consists of payments to merchandise suppliers, warehouse operating costs, including wages and employee benefits, utilities, credit and debit card processing fees, and operating leases. Cash used in operations also includes payments for income taxes. Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including inventory levels and turnover, payment terms with suppliers, and early payments to obtain discounts. --- ## Modified: Total Number of Shares Purchased as Part of Publicly Announced Program(1) **Key changes:** - Reworded sentence: "_______________ (1)Our share repurchase program is conducted under a $4,000 authorization approved by our Board of Directors in January 2023, which expires in January 2027." **Prior (2023):** _______________ (1)The repurchase program is conducted under a $4,000 authorization approved by our Board of Directors in January 2023, which expires in January 2027. This authorization revoked previously authorized but unused amounts, totaling $2,568. 18 18 18 Table of Contents Table of Contents **Current (2024):** _______________ (1)Our share repurchase program is conducted under a $4,000 authorization approved by our Board of Directors in January 2023, which expires in January 2027. --- ## Modified: Note 8 - Taxes **Key changes:** - Reworded sentence: "Income Taxes Income before income taxes is comprised of the following: 202420232022Domestic$7,255 $6,264 $5,759 Foreign2,485 2,223 2,081 Total$9,740 $8,487 $7,840 55 55 55 Table of Contents Table of Contents The provisions for income taxes are as follows: 202420232022Federal:Current$1,245 $1,056 $798 Deferred48 33 (35)Total federal1,293 1,089 763 State:Current431 374 333 Deferred(77)10 (5)Total state354 384 328 Foreign:Current798 732 851 Deferred(72)(10)(17)Total foreign726 722 834 Total provision for income taxes$2,373 $2,195 $1,925 The reconciliation between the statutory tax rate and the effective rate for 2024, 2023, and 2022 is as follows: 202420232022Federal taxes at statutory rate$2,045 21.0 %$1,782 21.0 %$1,646 21.0 %State taxes, net288 3.0 302 3.6 267 3.4 Foreign taxes, net109 1.1 160 1.9 231 3.0 Employee stock ownership plan (ESOP)(120)(1.2)(25)(0.3)(23)(0.3)Other51 0.5 (24)(0.3)(196)(2.5)Total$2,373 24.4 %$2,195 25.9 %$1,925 24.6 % The Company's effective tax rate in 2024 included discrete tax benefits of $94 related to the portion of the special dividend payable through the Company's 401(k) plan, a net non-recurring tax benefit of $63 related to a transfer pricing settlement and certain true-ups of tax reserves, and $45 of excess tax benefits related to stock compensation." - Reworded sentence: "consolidated subsidiaries (other than China) indefinitely reinvested after 2023, in the case of Taiwan, and after 2017, in the case of all other subsidiaries, and has recorded the estimated incremental foreign withholding taxes (net of available foreign tax credits) and state income taxes payable assuming a hypothetical repatriation to the U.S." - Reworded sentence: "consolidated subsidiaries, which totaled $3,135, to be indefinitely reinvested and has not provided for withholding or state taxes." - Reworded sentence: "The total amount of such unrecognized tax benefits that if recognized would favorably affect the effective income tax rate in future periods is $79 and $14 at the end of 2024 and 2023." - Reworded sentence: "Accrued interest and penalties recognized during 2024 and 2023, and accrued at the end of each respective period were immaterial." **Prior (2023):** Income Taxes Income before income taxes is comprised of the following: 202320222021Domestic$6,264 $5,759 $4,931 Foreign2,223 2,081 1,749 Total$8,487 $7,840 $6,680 The provisions for income taxes are as follows: 202320222021Federal:Current$1,056 $798 $718 Deferred33 (35)84 Total federal1,089 763 802 State:Current374 333 265 Deferred10 (5)11 Total state384 328 276 Foreign:Current732 851 557 Deferred(10)(17)(34)Total foreign722 834 523 Total provision for income taxes$2,195 $1,925 $1,601 The reconciliation between the statutory tax rate and the effective rate for 2023, 2022, and 2021 is as follows: 202320222021Federal taxes at statutory rate$1,782 21.0 %$1,646 21.0 %$1,403 21.0 %State taxes, net302 3.6 267 3.4 243 3.6 Foreign taxes, net160 1.9 231 3.0 92 1.4 Employee stock ownership plan (ESOP)(25)(0.3)(23)(0.3)(91)(1.3)Other(24)(0.3)(196)(2.5)(46)(0.7)Total$2,195 25.9 %$1,925 24.6 %$1,601 24.0 % The Company recognized total net tax benefits of $62, $130 and $163 in 2023, 2022 and 2021. These include benefits of $54, $94 and $75, related to stock-based compensation. During 2021, there was a net tax benefit of $70 related to the portion of the special dividend paid through the Company's 401(k) plan. 53 53 53 Table of Contents Table of Contents The components of the deferred tax assets (liabilities) are as follows: 20232022Deferred tax assets:Equity compensation$89 $84 Deferred income/membership fees309 302 Foreign tax credit carry forward250 201 Operating lease liabilities678 727 Accrued liabilities and reserves761 694 Other20 5 Total deferred tax assets2,107 2,013 Valuation allowance(422)(313)Total net deferred tax assets1,685 1,700 Deferred tax liabilities:Property and equipment(867)(962)Merchandise inventories(380)(231)Operating lease right-of-use assets(655)(701)Foreign branch deferreds(87)(85)Total deferred tax liabilities(1,989)(1,979) Net deferred tax liabilities$(304)$(279) The deferred tax accounts at the end of 2023 and 2022 include deferred income tax assets of $491 and $445, included in other long-term assets; and deferred income tax liabilities of $795 and $724, included in other long-term liabilities. In 2023 and 2022, the Company had valuation allowances of $422 and $313, primarily related to foreign tax credits that the Company believes will not be realized due to carry forward limitations. The foreign tax credit carry forwards are set to expire beginning in fiscal 2030. The Company generally no longer considers fiscal year earnings of non-U.S. consolidated subsidiaries after 2017 to be indefinitely reinvested (other than China and Taiwan) and has recorded the estimated incremental foreign withholding taxes (net of available foreign tax credits) and state income taxes payable assuming a hypothetical repatriation to the U.S. The Company considers undistributed earnings of certain non-U.S. consolidated subsidiaries, which totaled $3,225, to be indefinitely reinvested and has not provided for withholding or state taxes. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2023 and 2022 is as follows: 20232022Gross unrecognized tax benefit at beginning of year$16 $33 Gross increases - current year tax positions1 1 Gross increases - tax positions in prior years11 12 Gross decreases - tax positions in prior years(11)(12)Gross decreases - settlements - (12)Lapse of statute of limitations(1)(6)Gross unrecognized tax benefit at end of year$16 $16 54 54 54 Table of Contents Table of Contents The gross unrecognized tax benefit includes tax positions for which the ultimate deductibility is highly certain but there is uncertainty about the timing of such deductibility. At the end of 2023 and 2022, these amounts were immaterial. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of these tax positions would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority. The total amount of such unrecognized tax benefits that if recognized would favorably affect the effective income tax rate in future periods is $14 and $15 at the end of 2023 and 2022. Accrued interest and penalties related to income tax matters are classified as a component of income tax expense. Accrued interest and penalties recognized during 2023 and 2022, and accrued at the end of each respective period were not material. The Company is currently under audit by several jurisdictions in the United States and abroad. Some audits may conclude in the next 12 months, and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts. It is not practical to estimate the effect, if any, of any amount of such change during the next 12 months to previously recorded uncertain tax positions in connection with the audits. The Company does not anticipate that there will be a material increase or decrease in the total amount of unrecognized tax benefits in the next 12 months. The Company files income tax returns in the United States, various state and local jurisdictions, in Canada, and in several other foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or local examination for years before fiscal 2018. The Company is currently subject to examination in California for fiscal years 2013 to present. Other Taxes The Company is subject to multiple examinations for value added, sales-based, payroll, product, import or other non-income taxes in various jurisdictions. In certain cases, the Company has received assessments from the authorities. Possible losses or range of possible losses associated with these matters are either immaterial or an estimate of the possible loss or range of loss cannot be made at this time. If certain matters or a group of matters were to be decided adversely to the Company, it could result in a charge that might be material to the results of an individual fiscal quarter or year. **Current (2024):** Income Taxes Income before income taxes is comprised of the following: 202420232022Domestic$7,255 $6,264 $5,759 Foreign2,485 2,223 2,081 Total$9,740 $8,487 $7,840 55 55 55 Table of Contents Table of Contents The provisions for income taxes are as follows: 202420232022Federal:Current$1,245 $1,056 $798 Deferred48 33 (35)Total federal1,293 1,089 763 State:Current431 374 333 Deferred(77)10 (5)Total state354 384 328 Foreign:Current798 732 851 Deferred(72)(10)(17)Total foreign726 722 834 Total provision for income taxes$2,373 $2,195 $1,925 The reconciliation between the statutory tax rate and the effective rate for 2024, 2023, and 2022 is as follows: 202420232022Federal taxes at statutory rate$2,045 21.0 %$1,782 21.0 %$1,646 21.0 %State taxes, net288 3.0 302 3.6 267 3.4 Foreign taxes, net109 1.1 160 1.9 231 3.0 Employee stock ownership plan (ESOP)(120)(1.2)(25)(0.3)(23)(0.3)Other51 0.5 (24)(0.3)(196)(2.5)Total$2,373 24.4 %$2,195 25.9 %$1,925 24.6 % The Company's effective tax rate in 2024 included discrete tax benefits of $94 related to the portion of the special dividend payable through the Company's 401(k) plan, a net non-recurring tax benefit of $63 related to a transfer pricing settlement and certain true-ups of tax reserves, and $45 of excess tax benefits related to stock compensation. In 2023 and 2022, tax benefits of $54 and $94 were recognized related to stock compensation. 56 56 56 Table of Contents Table of Contents The components of the deferred tax assets (liabilities) are as follows: 20242023Deferred tax assets:Equity compensation$96 $89 Deferred income/membership fees313 309 Foreign tax credit carry forward315 250 Operating lease liabilities678 678 Accrued liabilities and reserves873 761 Other - 20 Total deferred tax assets2,275 2,107 Valuation allowance(494)(422)Total net deferred tax assets1,781 1,685 Deferred tax liabilities:Property and equipment(948)(867)Merchandise inventories(296)(380)Operating lease right-of-use assets(652)(655)Foreign branch deferreds(105)(87)Other(1) - Total deferred tax liabilities(2,002)(1,989) Net deferred tax liabilities$(221)$(304) The deferred tax accounts at the end of 2024 and 2023 include deferred income tax assets of $548 and $491, included in other long-term assets; and deferred income tax liabilities of $769 and $795, included in other long-term liabilities. In 2024 and 2023, the Company had valuation allowances of $494 and $422, primarily related to foreign tax credits that the Company believes will not be realized due to carry forward limitations. The foreign tax credit carry forwards are set to expire beginning in fiscal 2030. The Company generally no longer considers fiscal year earnings of non-U.S. consolidated subsidiaries (other than China) indefinitely reinvested after 2023, in the case of Taiwan, and after 2017, in the case of all other subsidiaries, and has recorded the estimated incremental foreign withholding taxes (net of available foreign tax credits) and state income taxes payable assuming a hypothetical repatriation to the U.S. The Company considers undistributed earnings of certain non-U.S. consolidated subsidiaries, which totaled $3,135, to be indefinitely reinvested and has not provided for withholding or state taxes. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2024 and 2023 is as follows: 20242023Gross unrecognized tax benefit at beginning of year$16 $16 Gross increases - current year tax positions3 1 Gross increases - tax positions in prior years64 11 Gross decreases - tax positions in prior years - (11)Lapse of statute of limitations(2)(1)Gross unrecognized tax benefit at end of year$81 $16 57 57 57 Table of Contents Table of Contents The gross unrecognized tax benefit includes tax positions for which the ultimate deductibility is highly certain but there is uncertainty about the timing of such deductibility. At the end of 2024 and 2023, these amounts were immaterial. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of these tax positions would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority. The total amount of such unrecognized tax benefits that if recognized would favorably affect the effective income tax rate in future periods is $79 and $14 at the end of 2024 and 2023. Accrued interest and penalties related to income tax matters are classified as a component of income tax expense. Accrued interest and penalties recognized during 2024 and 2023, and accrued at the end of each respective period were immaterial. The Company is currently under audit by several jurisdictions in the United States and abroad. Some audits may conclude in the next 12 months, and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts. It is not practical to estimate the effect, if any, of any amount of such change during the next 12 months to previously recorded uncertain tax positions in connection with the audits. The Company does not anticipate that there will be a material increase or decrease in the total amount of unrecognized tax benefits in the next 12 months. The Company files income tax returns in the United States, various state and local jurisdictions, in Canada, and in several other foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or local examination for years before fiscal 2018. The Company is currently subject to examination in California for fiscal years 2013 to present. Other Taxes The Company is subject to multiple examinations for value added, sales-based, payroll, product, import or other non-income taxes in various jurisdictions. In certain cases, the Company has received assessments from the authorities. Possible losses or range of possible losses associated with these matters are either immaterial or an estimate of the possible loss or range of loss cannot be made at this time. If certain matters or a group of matters were to be decided adversely to the Company, it could result in a charge that might be material to the results of an individual fiscal quarter or year. --- ## Modified: Building(1) **Key changes:** - Reworded sentence: "_______________ (1)134 of the 187 leases are land-only leases, where Costco owns the building." - Reworded sentence: "19 19 19 Table of Contents Table of Contents Item 3 - Legal Proceedings See discussion of Legal Proceedings in Note 10 to the consolidated financial statements included in Item 8 of this Report." **Prior (2023):** _______________ (1)132 of the 184 leases are land-only leases, where Costco owns the building. At the end of 2023, our warehouses contained approximately 126.3 million square feet of operating floor space: 87.6 million in the U.S.; 15.3 million in Canada; and 23.4 million in Other International. Total square feet associated with distribution and logistics facilities were approximately 33.1 million. Additionally, we operate various processing, packaging, manufacturing and other facilities to support our business, which includes the production of certain private-label items. Item 3 - Legal Proceedings See discussion of Legal Proceedings in Note 10 to the consolidated financial statements included in Item 8 of this Report. Item 4 - Mine Safety Disclosures Not applicable. PART II Item 5 - Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities **Current (2024):** _______________ (1)134 of the 187 leases are land-only leases, where Costco owns the building. At the end of 2024, our warehouses contained approximately 130.9 million square feet of operating floor space: 91.1 million in the U.S.; 15.5 million in Canada; and 24.3 million in Other International. Total square feet associated with distribution and logistics facilities were approximately 31.9 million. Additionally, we operate various processing, packaging, manufacturing and other facilities to support our business, which includes the production of certain private-label items. 19 19 19 Table of Contents Table of Contents Item 3 - Legal Proceedings See discussion of Legal Proceedings in Note 10 to the consolidated financial statements included in Item 8 of this Report. Item 4 - Mine Safety Disclosures Not applicable. PART II Item 5 - Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities --- ## Modified: Pandemics and other health crises could affect our business, financial condition and results of operations in many respects. **Key changes:** - Reworded sentence: "A pandemic could affect certain business operations, demand for our products and services, in-stock positions, costs of doing business, availability of labor, access to inventory, supply chain operations, our ability to predict future performance, exposure to litigation, and our financial performance, among other things." - Added sentence: "15 15 15 Table of Contents Table of Contents" **Prior (2023):** The emergence, severity, magnitude and duration of global or regional health crises are uncertain and difficult to predict. A pandemic, such as COVID-19, could affect certain business operations, demand for our products and services, in-stock positions, costs of doing business, availability of labor, access to inventory, supply chain operations, our ability to predict future performance, exposure to litigation, and our financial performance, among other things. Other factors and uncertainties include, but are not limited to: •The severity and duration of pandemics; •Evolving macroeconomic factors, including general economic uncertainty, unemployment rates, and recessionary pressures; •Changes in labor markets affecting us and our suppliers; •Unknown consequences on our business performance and initiatives stemming from the substantial investment of time and other resources to the pandemic response; •The pace of post-pandemic recovery; •The long-term impact of the pandemic on our business, including consumer behaviors; and •Disruption and volatility within the financial and credit markets. **Current (2024):** The emergence, severity, magnitude and duration of global or regional health crises are uncertain and difficult to predict. A pandemic could affect certain business operations, demand for our products and services, in-stock positions, costs of doing business, availability of labor, access to inventory, supply chain operations, our ability to predict future performance, exposure to litigation, and our financial performance, among other things. Other factors and uncertainties include, but are not limited to: •The severity and duration of pandemics; •Evolving macroeconomic factors, including general economic uncertainty, unemployment rates, and recessionary pressures; •Changes in labor markets affecting us and our suppliers; •Unknown consequences on our business performance and initiatives stemming from the substantial investment of time and other resources to the pandemic response; •The pace of post-pandemic recovery; •The long-term impact of the pandemic on our business, including consumer behaviors; and •Disruption and volatility within the financial and credit markets. 15 15 15 Table of Contents Table of Contents --- ## Modified: Interest Expense **Key changes:** - Reworded sentence: "202420232022Interest expense$169 $160 $158 Interest expense is primarily related to Senior Notes and financing leases." **Prior (2023):** 202320222021Interest expense$160 $158 $171 Interest expense is primarily related to Senior Notes and financing leases. For more information on our debt arrangements, refer to the consolidated financial statements included in Item 8 of this Report. **Current (2024):** 202420232022Interest expense$169 $160 $158 Interest expense is primarily related to Senior Notes and financing leases. For more information on our debt arrangements, refer to the consolidated financial statements included in Item 8 of this Report. --- ## Modified: EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS **Key changes:** - Reworded sentence: "Interest The accompanying notes are an integral part of these consolidated financial statements.40 The accompanying notes are an integral part of these consolidated financial statements.40 The accompanying notes are an integral part of these consolidated financial statements." **Prior (2023):** Interest The accompanying notes are an integral part of these consolidated financial statements.38 The accompanying notes are an integral part of these consolidated financial statements.38 The accompanying notes are an integral part of these consolidated financial statements. 38 Table of Contents Table of Contents **Current (2024):** Interest The accompanying notes are an integral part of these consolidated financial statements.40 The accompanying notes are an integral part of these consolidated financial statements.40 The accompanying notes are an integral part of these consolidated financial statements. 40 Table of Contents Table of Contents --- ## Modified: Note 5 - Leases **Key changes:** - Reworded sentence: "20242023AssetsOperating lease right-of-use assets$2,617 $2,713 Finance lease assets(1)1,433 1,325 Total lease assets$4,050 $4,038 LiabilitiesCurrentOperating lease liabilities(2)$179 $220 Finance lease liabilities(2)147 129 Long-termOperating lease liabilities2,375 2,426 Finance lease liabilities(3)1,351 1,303 Total lease liabilities$4,052 $4,078 Finance lease assets(1) 1,433 1,325 Operating lease liabilities(2) 179 220 Finance lease liabilities(2) 147 129 Finance lease liabilities(3) 1,351 1,303 _______________ (1)Included in other long-term assets in the consolidated balance sheets." - Reworded sentence: "20242023Weighted-average remaining lease term (years)Operating leases1920Finance leases2324Weighted-average discount rateOperating leases2.67 %2.47 %Finance leases4.59 %4.47 % Operating leases Finance leases Operating leases Finance leases 52 52 52 Table of Contents Table of Contents The components of lease expense, excluding short-term lease costs and sublease income (which were immaterial), were as follows: 202420232022Operating lease costs(1)$284 $309 $297 Finance lease costs:Amortization of lease assets(1)97 169 128 Interest on lease liabilities(2)58 54 45 Variable lease costs(1)163 160 157 Total lease costs$602 $692 $627 Operating lease costs(1) Amortization of lease assets(1) Interest on lease liabilities(2) Variable lease costs(1) _______________ (1)Included in selling, general and administrative expenses and merchandise costs in the consolidated statements of income." - Reworded sentence: "Supplemental cash flow information related to leases was as follows: 202420232022Cash paid for amounts included in the measurement of lease liabilities:Operating cash flows - operating leases$274 $287 $277 Operating cash flows - finance leases58 54 45 Financing cash flows - finance leases136 291 176 Operating lease assets obtained in exchange for new or modified leases125 202 231 Finance lease assets obtained in exchange for new or modified leases200 100 794 Operating cash flows - operating leases Operating cash flows - finance leases Financing cash flows - finance leases As of September 1, 2024, future minimum payments during the next five fiscal years and thereafter are as follows: Operating Leases(1)Finance Leases2025$242 $204 2026247 128 2027226 120 2028209 122 2029183 109 Thereafter2,205 1,664 Total(2)3,312 2,347 Less amount representing interest758 849 Present value of lease liabilities$2,554 $1,498" **Prior (2023):** The tables below present information regarding the Company's lease assets and liabilities. 20232022AssetsOperating lease right-of-use assets$2,713 $2,774 Finance lease assets(1)1,325 1,620 Total lease assets$4,038 $4,394 LiabilitiesCurrentOperating lease liabilities(2)$220 $239 Finance lease liabilities(2)129 245 Long-termOperating lease liabilities2,426 2,482 Finance lease liabilities(3)1,303 1,383 Total lease liabilities$4,078 $4,349 Finance lease assets(1) 1,325 1,620 Operating lease liabilities(2) 220 239 Finance lease liabilities(2) 129 245 Finance lease liabilities(3) 1,303 1,383 _______________ (1)Included in other long-term assets in the consolidated balance sheets. (2)Included in other current liabilities in the consolidated balance sheets. (3)Included in other long-term liabilities in the consolidated balance sheets. 20232022Weighted-average remaining lease term (years)Operating leases2020Finance leases2417Weighted-average discount rateOperating leases2.47 %2.26 %Finance leases4.47 %3.97 % Operating leases Finance leases Operating leases Finance leases The components of lease expense, excluding short-term lease costs and sublease income (which were not material), were as follows: 202320222021Operating lease costs(1)$309 $297 $296 Finance lease costs:Amortization of lease assets(1)169 128 50 Interest on lease liabilities(2)54 45 37 Variable lease costs(1)160 157 151 Total lease costs$692 $627 $534 Operating lease costs(1) Amortization of lease assets(1) Interest on lease liabilities(2) Variable lease costs(1) _______________ (1)Included in selling, general and administrative expenses and merchandise costs in the consolidated statements of income. (2)Included in interest expense and merchandise costs in the consolidated statements of income. 50 50 50 Table of Contents Table of Contents Supplemental cash flow information related to leases was as follows: 202320222021Cash paid for amounts included in the measurement of lease liabilities:Operating cash flows - operating leases$287 $277 $282 Operating cash flows - finance leases54 45 37 Financing cash flows - finance leases291 176 67 Operating lease assets obtained in exchange for new or modified leases202 231 350 Financing lease assets obtained in exchange for new or modified leases100 794 399 Operating cash flows - operating leases Operating cash flows - finance leases Financing cash flows - finance leases As of September 3, 2023, future minimum payments during the next five fiscal years and thereafter are as follows: Operating Leases(1)Finance Leases2024$277 $180 2025230 175 2026226 100 2027206 91 2028191 92 Thereafter2,271 1,579 Total(2)3,401 2,217 Less amount representing interest755 785 Present value of lease liabilities$2,646 $1,432 **Current (2024):** The tables below present information regarding the Company's lease assets and liabilities. 20242023AssetsOperating lease right-of-use assets$2,617 $2,713 Finance lease assets(1)1,433 1,325 Total lease assets$4,050 $4,038 LiabilitiesCurrentOperating lease liabilities(2)$179 $220 Finance lease liabilities(2)147 129 Long-termOperating lease liabilities2,375 2,426 Finance lease liabilities(3)1,351 1,303 Total lease liabilities$4,052 $4,078 Finance lease assets(1) 1,433 1,325 Operating lease liabilities(2) 179 220 Finance lease liabilities(2) 147 129 Finance lease liabilities(3) 1,351 1,303 _______________ (1)Included in other long-term assets in the consolidated balance sheets. (2)Included in other current liabilities in the consolidated balance sheets. (3)Included in other long-term liabilities in the consolidated balance sheets. 20242023Weighted-average remaining lease term (years)Operating leases1920Finance leases2324Weighted-average discount rateOperating leases2.67 %2.47 %Finance leases4.59 %4.47 % Operating leases Finance leases Operating leases Finance leases 52 52 52 Table of Contents Table of Contents The components of lease expense, excluding short-term lease costs and sublease income (which were immaterial), were as follows: 202420232022Operating lease costs(1)$284 $309 $297 Finance lease costs:Amortization of lease assets(1)97 169 128 Interest on lease liabilities(2)58 54 45 Variable lease costs(1)163 160 157 Total lease costs$602 $692 $627 Operating lease costs(1) Amortization of lease assets(1) Interest on lease liabilities(2) Variable lease costs(1) _______________ (1)Included in selling, general and administrative expenses and merchandise costs in the consolidated statements of income. (2)Included in interest expense and merchandise costs in the consolidated statements of income. Supplemental cash flow information related to leases was as follows: 202420232022Cash paid for amounts included in the measurement of lease liabilities:Operating cash flows - operating leases$274 $287 $277 Operating cash flows - finance leases58 54 45 Financing cash flows - finance leases136 291 176 Operating lease assets obtained in exchange for new or modified leases125 202 231 Finance lease assets obtained in exchange for new or modified leases200 100 794 Operating cash flows - operating leases Operating cash flows - finance leases Financing cash flows - finance leases As of September 1, 2024, future minimum payments during the next five fiscal years and thereafter are as follows: Operating Leases(1)Finance Leases2025$242 $204 2026247 128 2027226 120 2028209 122 2029183 109 Thereafter2,205 1,664 Total(2)3,312 2,347 Less amount representing interest758 849 Present value of lease liabilities$2,554 $1,498 --- ## Modified: NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO: **Key changes:** - Reworded sentence: "The accompanying notes are an integral part of these consolidated financial statements.36 The accompanying notes are an integral part of these consolidated financial statements.36 The accompanying notes are an integral part of these consolidated financial statements." **Prior (2023):** The accompanying notes are an integral part of these consolidated financial statements.34 The accompanying notes are an integral part of these consolidated financial statements.34 The accompanying notes are an integral part of these consolidated financial statements. 34 Table of Contents Table of Contents **Current (2024):** The accompanying notes are an integral part of these consolidated financial statements.36 The accompanying notes are an integral part of these consolidated financial statements.36 The accompanying notes are an integral part of these consolidated financial statements. 36 Table of Contents Table of Contents --- ## Modified: Note 9 - Net Income per Common and Common Equivalent Share **Key changes:** - Reworded sentence: "The following table shows the amounts used in computing net income per share and the weighted average number of shares of basic and of potentially dilutive common shares outstanding (shares in 000's): 202420232022Net income attributable to Costco$7,367 $6,292 $5,844 Weighted average basic shares443,914 443,854 443,651 RSUs845 598 1,106 Weighted average diluted shares444,759 444,452 444,757 Net income attributable to Costco Weighted average basic shares Weighted average diluted shares Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period." **Prior (2023):** The following table shows the amounts used in computing net income per share and the weighted average number of shares of basic and of potentially dilutive common shares outstanding (shares in 000's): 202320222021Net income attributable to Costco$6,292 $5,844 $5,007 Weighted average basic shares443,854 443,651 443,089 RSUs598 1,106 1,257 Weighted average diluted shares444,452 444,757 444,346 Net income attributable to Costco Weighted average basic shares Weighted average diluted shares **Current (2024):** The following table shows the amounts used in computing net income per share and the weighted average number of shares of basic and of potentially dilutive common shares outstanding (shares in 000's): 202420232022Net income attributable to Costco$7,367 $6,292 $5,844 Weighted average basic shares443,914 443,854 443,651 RSUs845 598 1,106 Weighted average diluted shares444,759 444,452 444,757 Net income attributable to Costco Weighted average basic shares Weighted average diluted shares Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated based on the dilutive effect of RSUs using the treasury stock method. --- ## Modified: Cash Flows from Investing Activities **Key changes:** - Reworded sentence: "Net cash used in investing activities totaled $4,409 in 2024, compared to $4,972 in 2023, and is primarily related to capital expenditures." **Prior (2023):** Net cash used in investing activities totaled $4,972 in 2023, compared to $3,915 in 2022, and is primarily related to capital expenditures. Net cash flows from investing activities also includes purchases and maturities of short-term investments. Capital Expenditures Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses. Capital is also required for information systems, manufacturing and distribution facilities, initial warehouse operations, and working capital. In 2023, we spent $4,323 on capital expenditures, and it is our current intention to spend approximately $4,400 to $4,600 during fiscal 2024. These expenditures are expected to be financed with cash from operations, existing cash and cash equivalents, and short-term investments. We opened 26 new warehouses, including three relocations, in 2023, and plan to open up to 28 additional new warehouses, including one relocation, in 2024. There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment. **Current (2024):** Net cash used in investing activities totaled $4,409 in 2024, compared to $4,972 in 2023, and is primarily related to capital expenditures. Net cash from investing activities also includes purchases and maturities of short-term investments. Capital Expenditure Plans Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems and manufacturing and distribution facilities. In 2024, we spent $4,710 on capital expenditures, and it is our current intention to spend a similar amount during fiscal 2025. These expenditures are expected to be financed with cash from operations, cash and cash equivalents, and short-term investments. We opened 30 new warehouses, including one relocation, in 2024, and plan to 28 28 28 Table of Contents Table of Contents open up to 29 additional new warehouses, including three relocations, in 2025. There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment. --- ## Modified: Interest Income and Other, Net **Key changes:** - Reworded sentence: "202420232022Interest income$533 $470 $61 Foreign-currency transaction gains, net26 29 106 Other, net65 34 38 Interest income and other, net$624 $533 $205 The increase in interest income in 2024 was due to higher global interest rates." **Prior (2023):** 202320222021Interest income$470 $61 $41 Foreign-currency transaction gains, net29 106 56 Other, net34 38 46 Interest income and other, net$533 $205 $143 The increase in interest income in 2023 was due to higher global interest rates and higher average cash and investment balances. Foreign-currency transaction gains, net include revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations and mark-to-market adjustments for forward foreign-exchange contracts. See Derivatives and Foreign Currency sections in Note 1 to the consolidated financial statements included in Item 8 of this Report. **Current (2024):** 202420232022Interest income$533 $470 $61 Foreign-currency transaction gains, net26 29 106 Other, net65 34 38 Interest income and other, net$624 $533 $205 The increase in interest income in 2024 was due to higher global interest rates. Foreign-currency transaction gains, net, include revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations and mark-to-market adjustments for forward foreign-exchange contracts. See Derivatives and Foreign Currency sections in Note 1 to the consolidated financial statements included in Item 8 of this Report. --- ## Modified: COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO **Key changes:** - Reworded sentence: "The accompanying notes are an integral part of these consolidated financial statements.37 The accompanying notes are an integral part of these consolidated financial statements.37 The accompanying notes are an integral part of these consolidated financial statements." **Prior (2023):** The accompanying notes are an integral part of these consolidated financial statements.35 The accompanying notes are an integral part of these consolidated financial statements.35 The accompanying notes are an integral part of these consolidated financial statements. 35 Table of Contents Table of Contents **Current (2024):** The accompanying notes are an integral part of these consolidated financial statements.37 The accompanying notes are an integral part of these consolidated financial statements.37 The accompanying notes are an integral part of these consolidated financial statements. 37 Table of Contents Table of Contents --- ## Modified: Note 2 - Investments **Key changes:** - Reworded sentence: "The Company's investments were as follows: 2024:CostBasisUnrealizedLosses, NetRecordedBasisAvailable-for-sale:Government and agency securities$689 $(1)$688 Held-to-maturity:Certificates of deposit550 - 550 Total short-term investments$1,239 $(1)$1,238 2023:CostBasisUnrealizedLosses, NetRecordedBasisAvailable-for-sale:Government and agency securities$650 $(17)$633 Held-to-maturity:Certificates of deposit901 - 901 Total short-term investments$1,551 $(17)$1,534 Gross unrecognized holding gains and losses on available-for-sale securities were immaterial for the years ended September 1, 2024, and September 3, 2023." - Reworded sentence: "There were no sales of available-for-sale securities during 2024 or 2023." **Prior (2023):** The Company's investments were as follows: 2023:CostBasisUnrealizedLosses, NetRecordedBasisAvailable-for-sale:Government and agency securities$650 $(17)$633 Held-to-maturity:Certificates of deposit901 - 901 Total short-term investments$1,551 $(17)$1,534 47 47 47 Table of Contents Table of Contents 2022:CostBasisUnrealizedLosses, NetRecordedBasisAvailable-for-sale:Government and agency securities$534 $(5)$529 Held-to-maturity:Certificates of deposit317 - 317 Total short-term investments$851 $(5)$846 Gross unrecognized holding gains and losses on available-for-sale securities were not material for the years ended September 3, 2023, and August 28, 2022. At those dates, there were no available-for-sale securities in a material continuous unrealized-loss position. There were no sales of available-for-sale securities during 2023 or 2022. The maturities of available-for-sale and held-to-maturity securities at the end of 2023 are as follows: Available-For-SaleHeld-To-Maturity Cost BasisFair ValueDue in one year or less$111 $110 $901 Due after one year through five years337 330 - Due after five years202193 - Total$650 $633 $901 **Current (2024):** The Company's investments were as follows: 2024:CostBasisUnrealizedLosses, NetRecordedBasisAvailable-for-sale:Government and agency securities$689 $(1)$688 Held-to-maturity:Certificates of deposit550 - 550 Total short-term investments$1,239 $(1)$1,238 2023:CostBasisUnrealizedLosses, NetRecordedBasisAvailable-for-sale:Government and agency securities$650 $(17)$633 Held-to-maturity:Certificates of deposit901 - 901 Total short-term investments$1,551 $(17)$1,534 Gross unrecognized holding gains and losses on available-for-sale securities were immaterial for the years ended September 1, 2024, and September 3, 2023. At those dates, there were no available-for-sale securities in a material continuous unrealized-loss position. There were no sales of available-for-sale securities during 2024 or 2023. The maturities of available-for-sale and held-to-maturity securities at the end of 2024 are as follows: Available-For-SaleHeld-To-Maturity Cost BasisFair ValueDue in one year or less$144 $144 $550 Due after one year through five years391 391 - Due after five years154 153 - Total$689 $688 $550 --- ## Modified: Operating Leases(1) **Key changes:** - Reworded sentence: "Total(2) 1,498 _______________ (1)Operating lease payments have not been reduced by expected future sublease income of $98." **Prior (2023):** Total(2) 1,432 _______________ (1)Operating lease payments have not been reduced by future sublease income of $83. (2)Excludes $843 of lease payments for leases that have been signed but not commenced. **Current (2024):** Total(2) 1,498 _______________ (1)Operating lease payments have not been reduced by expected future sublease income of $98. (2)Excludes $1,080 of lease payments for leases that have been signed but not commenced. --- ## Modified: Note 11 - Segment Reporting **Key changes:** - Reworded sentence: "The following table provides information for the Company's reportable segments: United StatesCanadaOtherInternationalTotal2024Total revenue$184,143 $34,874 $35,436 $254,453 Operating income6,217 1,648 1,420 9,285 Depreciation and amortization1,730 192 315 2,237 Additions to property and equipment3,725 351 634 4,710 Property and equipment, net20,638 2,602 5,792 29,032 Total assets48,816 6,915 14,100 69,831 2023Total revenue$176,630 $33,056 $32,604 $242,290 Operating income5,392 1,448 1,274 8,114 Depreciation and amortization1,599 183 295 2,077 Additions to property and equipment3,288 281 754 4,323 Property and equipment, net18,760 2,443 5,481 26,684 Total assets49,189 6,420 13,385 68,994 2022Total revenue$165,294 $31,675 $29,985 $226,954 Operating income5,268 1,346 1,179 7,793 Depreciation and amortization1,436 180 284 1,900 Additions to property and equipment2,795 388 708 3,891 Property and equipment, net17,205 2,459 4,982 24,646 Total assets44,904 6,558 12,704 64,166 Disaggregated Revenue The following table summarizes net sales by merchandise category; sales from e-commerce sites and business centers have been allocated to the applicable merchandise categories: 202420232022Foods and Sundries$101,463 $96,175 $85,629 Non-Foods63,973 60,865 61,100 Fresh Foods34,220 31,977 29,527 Warehouse Ancillary and Other Businesses49,969 48,693 46,474 Total net sales$249,625 $237,710 $222,730 Foods and Sundries Non-Foods Fresh Foods Warehouse Ancillary and Other Businesses Total net sales 62 62 62 Table of Contents Table of Contents Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None." **Prior (2023):** The Company is principally engaged in the operation of membership warehouses through wholly owned subsidiaries in the U.S., Canada, Mexico, Japan, the U.K., Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden. Reportable segments are largely based on management's organization of the operating segments for operational decisions and assessments of financial performance, which considers geographic locations. The material accounting policies of the segments are as described in Note 1. Inter-segment net sales and expenses have been eliminated in computing total revenue and operating income. The following table provides information for the Company's reportable segments: United StatesCanadaOtherInternationalTotal2023Total revenue$176,630 $33,056 $32,604 $242,290 Operating income5,392 1,448 1,274 8,114 Depreciation and amortization1,599 183 295 2,077 Additions to property and equipment3,288 281 754 4,323 Property and equipment, net18,760 2,443 5,481 26,684 Total assets49,189 6,420 13,385 68,994 2022Total revenue$165,294 $31,675 $29,985 $226,954 Operating income5,268 1,346 1,179 7,793 Depreciation and amortization1,436 180 284 1,900 Additions to property and equipment2,795 388 708 3,891 Property and equipment, net17,205 2,459 4,982 24,646 Total assets44,904 6,558 12,704 64,166 2021Total revenue$141,398 $27,298 $27,233 $195,929 Operating income4,470 1,093 1,145 6,708 Depreciation and amortization1,339 177 265 1,781 Additions to property and equipment2,612 272 704 3,588 Property and equipment, net15,993 2,317 5,182 23,492 Total assets39,589 5,962 13,717 59,268 Disaggregated Revenue The following table summarizes net sales by merchandise category; sales from e-commerce websites and business centers have been allocated to the applicable merchandise categories: 202320222021Foods and Sundries$96,175 $85,629 $77,277 Non-Foods60,865 61,100 55,966 Fresh Foods31,977 29,527 27,183 Warehouse Ancillary and Other Businesses48,693 46,474 31,626 Total net sales$237,710 $222,730 $192,052 Foods and Sundries Non-Foods Fresh Foods Warehouse Ancillary and Other Businesses Total net sales 59 59 59 Table of Contents Table of Contents Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A - Controls and Procedures **Current (2024):** The Company is principally engaged in the operation of membership warehouses through wholly owned subsidiaries in the U.S., Canada, Mexico, Japan, the U.K., Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden. Reportable segments are largely based on management's organization of the operating segments for operational decisions and assessments of financial performance, which considers geographic locations. The material accounting policies of the segments are as described in Note 1. Inter-segment net sales and expenses have been eliminated in computing total revenue and operating income. The following table provides information for the Company's reportable segments: United StatesCanadaOtherInternationalTotal2024Total revenue$184,143 $34,874 $35,436 $254,453 Operating income6,217 1,648 1,420 9,285 Depreciation and amortization1,730 192 315 2,237 Additions to property and equipment3,725 351 634 4,710 Property and equipment, net20,638 2,602 5,792 29,032 Total assets48,816 6,915 14,100 69,831 2023Total revenue$176,630 $33,056 $32,604 $242,290 Operating income5,392 1,448 1,274 8,114 Depreciation and amortization1,599 183 295 2,077 Additions to property and equipment3,288 281 754 4,323 Property and equipment, net18,760 2,443 5,481 26,684 Total assets49,189 6,420 13,385 68,994 2022Total revenue$165,294 $31,675 $29,985 $226,954 Operating income5,268 1,346 1,179 7,793 Depreciation and amortization1,436 180 284 1,900 Additions to property and equipment2,795 388 708 3,891 Property and equipment, net17,205 2,459 4,982 24,646 Total assets44,904 6,558 12,704 64,166 Disaggregated Revenue The following table summarizes net sales by merchandise category; sales from e-commerce sites and business centers have been allocated to the applicable merchandise categories: 202420232022Foods and Sundries$101,463 $96,175 $85,629 Non-Foods63,973 60,865 61,100 Fresh Foods34,220 31,977 29,527 Warehouse Ancillary and Other Businesses49,969 48,693 46,474 Total net sales$249,625 $237,710 $222,730 Foods and Sundries Non-Foods Fresh Foods Warehouse Ancillary and Other Businesses Total net sales 62 62 62 Table of Contents Table of Contents Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A - Controls and Procedures --- ## Modified: Gross Margin **Key changes:** - Reworded sentence: "202420232022Net sales$249,625$237,710$222,730Less merchandise costs222,358212,586199,382Gross margin$27,267$25,124$23,348Gross margin percentage10.92 %10.57 %10.48 % Gross margin percentage increased 35 basis points." - Reworded sentence: "and Canadian segments." **Prior (2023):** 202320222021Net sales$237,710$222,730$192,052Less merchandise costs212,586199,382170,684Gross margin$25,124$23,348$21,368Gross margin percentage10.57 %10.48 %11.13 % Gross margin percentage increased nine basis points compared to 2022. Excluding the impact of gasoline price deflation on net sales, gross margin was 10.50%, an increase of two basis points. This two basis point increase was positively impacted by: 18 basis points due to a smaller LIFO charge in 2023 compared to 2022, and seven basis points due to core merchandise categories, predominantly foods and sundries. These were offset by: 16 basis points due to the downsizing and then discontinuation of our charter shipping activities; four basis points due to increased 2% rewards; and three basis points due to warehouse ancillary and other businesses, predominantly e-commerce, partially offset by gasoline and business centers. Changes in foreign currencies relative to the U.S. dollar negatively impacted gross margin by approximately $349, compared to 2022, attributable to our Canadian and Other International Operations. The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased two basis points, driven by foods and sundries and non-foods, partially offset by fresh foods. This measure eliminates the impact of changes in sales penetration and gross margins from our warehouse ancillary and other businesses. Gross margin on a segment basis, when expressed as a percentage of the segment's own sales and excluding the impact of changes in gasoline prices on net sales (segment gross margin percentage), increased in our U.S. segment, due to a smaller LIFO charge and increases in core merchandise categories, primarily foods and sundries, partially offset by the charges related to the discontinuation of our charter shipping activities discussed above and warehouse ancillary and other businesses. Gross margin percentage increased in our Canada segment, attributable to increases in core merchandise categories and warehouse ancillary and other businesses. Our Other International gross margin percentage decreased, largely due to decreases in core merchandise categories, partially offset by warehouse ancillary and other businesses. All segments were negatively impacted by increased 2% rewards. **Current (2024):** 202420232022Net sales$249,625$237,710$222,730Less merchandise costs222,358212,586199,382Gross margin$27,267$25,124$23,348Gross margin percentage10.92 %10.57 %10.48 % Gross margin percentage increased 35 basis points. Excluding the impact of gasoline price deflation on net sales, gross margin percentage was 10.88%, an increase of 31 basis points. This increase was positively impacted by: 19 basis points due to warehouse ancillary and other businesses, primarily e-commerce and gasoline; 16 basis points due to the absence of charges related to the discontinuation of our charter shipping activities that were recorded in the first and third quarters of 2023; and three basis points due to a LIFO benefit. This increase was partially offset by four basis points in our core merchandise categories and three basis points due to increased 2% rewards. The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased 11 basis points. The increase was primarily due to non-foods, partially offset by fresh foods and foods and sundries. This measure eliminates the impact of changes in sales penetration and gross margins from our warehouse ancillary and other businesses. Gross margin on a segment basis, when expressed as a percentage of the segment's own sales and excluding the impact of changes in gasoline prices on net sales (segment gross margin percentage), increased in our U.S. and Canadian segments. Our U.S. segment performed similarly to the consolidated results above. Our Canadian segment gross margin percentage increased, primarily due to increases in core merchandise categories and warehouse ancillary and other businesses, partially offset by increased 2% rewards. Gross margin percentage decreased in our Other International segment, primarily due to increased 2% rewards and a decrease in core merchandise categories. 26 26 26 Table of Contents Table of Contents --- ## Modified: (amounts in millions) **Key changes:** - Reworded sentence: "52 Weeks Ended53 Weeks Ended52 Weeks EndedSeptember 1,2024September 3,2023August 28,2022CASH FLOWS FROM OPERATING ACTIVITIESNet income including noncontrolling interests$7,367 $6,292 $5,915 Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:Depreciation and amortization2,237 2,077 1,900 Non-cash lease expense315 412 377 Stock-based compensation818 774 724 Impairment of assets and other non-cash operating activities, net(9)495 39 Changes in operating assets and liabilities:Merchandise inventories(2,068)1,228 (4,003)Accounts payable1,938 (382)1,891 Other operating assets and liabilities, net741 172 549 Net cash provided by operating activities11,339 11,068 7,392 CASH FLOWS FROM INVESTING ACTIVITIESPurchases of short-term investments(1,470)(1,622)(1,121)Maturities and sales of short-term investments1,790 937 1,145 Additions to property and equipment(4,710)(4,323)(3,891)Other investing activities, net(19)36 (48)Net cash used in investing activities(4,409)(4,972)(3,915)CASH FLOWS FROM FINANCING ACTIVITIESRepayments of short-term borrowings(920)(935)(6)Proceeds from short-term borrowings928 917 53 Repayments of long-term debt(1,077)(75)(800)Proceeds from issuance of long-term debt498 - - Tax withholdings on stock-based awards(315)(303)(363)Repurchases of common stock(700)(676)(439)Cash dividend payments(9,041)(1,251)(1,498)Financing lease payments and other financing activities, net(137)(291)(180)Dividend to noncontrolling interest - - (208)Acquisition of noncontrolling interest - - (842)Net cash used in financing activities(10,764)(2,614)(4,283)EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS40 15 (249)Net change in cash and cash equivalents(3,794)3,497 (1,055)CASH AND CASH EQUIVALENTS BEGINNING OF YEAR13,700 10,203 11,258 CASH AND CASH EQUIVALENTS END OF YEAR$9,906 $13,700 $10,203 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the year for:Interest$129 $125 $145 Income taxes, net$2,319 $2,234 $1,940 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:Cash dividend declared, but not yet paid$ - $452 $ - Capital expenditures included in liabilities$203 $170 $156 Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities: Depreciation and amortization Non-cash lease expense Stock-based compensation Changes in operating assets and liabilities:" **Prior (2023):** 53 Weeks Ended52 Weeks Ended52 Weeks Ended September 3,2023August 28,2022August 29,2021NET INCOME INCLUDING NONCONTROLLING INTERESTS$6,292 $5,915 $5,079 Foreign-currency translation adjustment and other, net24 (721)181 Comprehensive income6,316 5,194 5,260 Less: Comprehensive income attributable to noncontrolling interests - 36 93 COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO$6,316 $5,158 $5,167 **Current (2024):** 52 Weeks Ended53 Weeks Ended52 Weeks Ended September 1,2024September 3,2023August 28,2022NET INCOME INCLUDING NONCONTROLLING INTERESTS$7,367 $6,292 $5,915 Foreign-currency translation adjustment and other, net(23)24 (721)Comprehensive income7,344 6,316 5,194 Less: Comprehensive income attributable to noncontrolling interests - - 36 COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO$7,344 $6,316 $5,158 --- ## Modified: Note 7 - Stock-Based Compensation **Key changes:** - Reworded sentence: "As required by the 2019 Incentive Plan, in conjunction with the 2024 special dividend, the number of shares subject to outstanding RSUs was increased on the dividend record date to preserve their value." - Reworded sentence: "54 54 54 Table of Contents Table of Contents The following table summarizes RSU transactions during 2024: Number ofUnits(in 000's)Weighted-AverageGrant Date FairValueOutstanding at the end of 20233,045 $405.63 Granted1,677 547.26 Vested and delivered(1,895)432.40 Forfeited(80)457.54 Special cash dividend52 N/AOutstanding at the end of 20242,799 $463.24 The weighted-average grant date fair value of RSUs granted was $547.26, $471.47, and $476.06 in 2024, 2023, and 2022." **Prior (2023):** The 2019 Incentive Plan authorized the issuance of 17,500,000 shares (10,000,000 RSUs) of common stock for future grants, plus the remaining shares that were available for grant and the future forfeited shares from grants under the previous plan, up to a maximum aggregate of 27,800,000 shares (15,885,000 RSUs). The Company issues new shares of common stock upon vesting of RSUs. Shares for vested RSUs are generally delivered to participants annually, net of shares withheld for taxes. Summary of Restricted Stock Unit Activity At the end of 2023, 8,747,000 shares were available to be granted as RSUs, and the following awards were outstanding: •2,869,000 time-based RSUs, which vest upon continued employment or service over specified periods of time; and •176,000 performance-based RSUs, of which 135,000 were granted to executive officers subject to the determination of the attainment of performance targets for 2023. This determination occurred in September 2023, at which time at least 33% of the units vested, as a result of the long service of all executive officers, with the exception of one executive officer who has less than 25 years of service. The remaining awards vest upon continued employment over specified periods of time. Please refer to Note 1 for accelerated vesting requirements. The following table summarizes RSU transactions during 2023: Number ofUnits(in 000's)Weighted-AverageGrant Date FairValueOutstanding at the end of 20223,449 $338.41 Granted1,814 471.47 Vested and delivered(2,102)352.53 Forfeited(116)398.31 Outstanding at the end of 20233,045 $405.63 The weighted-average grant date fair value of RSUs granted was $471.47, $476.06, and $369.15 in 2023, 2022, and 2021. The remaining unrecognized compensation cost related to non-vested RSUs at the end of 2023 was $790 and the weighted-average period of time over which this cost will be recognized is 1.6 years. Included in the outstanding balance at the end of 2023 were approximately 1,050,000 RSUs vested but not yet delivered. Summary of Stock-Based Compensation The following table summarizes stock-based compensation expense and the related tax benefits: 202320222021Stock-based compensation expense$774 $724 $665 Less recognized income tax benefit 163 154 140 Stock-based compensation expense, net$611 $570 $525 Less recognized income tax benefit 52 52 52 Table of Contents Table of Contents **Current (2024):** The 2019 Incentive Plan authorized the issuance of 17,500,000 shares (10,000,000 RSUs) of common stock for future grants, plus the remaining shares that were available for grant and the future forfeited shares from grants under the previous plan, up to a maximum aggregate of 27,800,000 shares (15,885,000 RSUs). The Company issues new shares of common stock upon vesting of RSUs. Shares for vested RSUs are generally delivered to participants annually, net of shares withheld for taxes. As required by the 2019 Incentive Plan, in conjunction with the 2024 special dividend, the number of shares subject to outstanding RSUs was increased on the dividend record date to preserve their value. They were adjusted by multiplying the number of outstanding shares by a factor of 1.018, representing the ratio of the Nasdaq closing price of $674.62 on December 26, 2023, which was the last trading day immediately prior to the ex-dividend date, to the Nasdaq opening price of $662.70 on the ex-dividend date, December 27, 2023. The outstanding RSUs increased by approximately 52,000. The adjustment did not result in additional stock-based compensation expense, as the fair value of the awards did not change. As further required by the 2019 Incentive Plan, the maximum number of shares issuable under the plan was proportionally adjusted, which resulted in an additional 128,000 RSU shares available to be granted. Summary of Restricted Stock Unit Activity At the end of 2024, 7,278,000 shares were available to be granted as RSUs, and the following awards, adjusted for the effects of the special dividend, were outstanding: •2,677,000 time-based RSUs, which vest upon continued employment or service over specified periods of time; and •122,000 performance-based RSUs, of which 95,000 were granted to executive officers subject to the determination of the attainment of performance targets for 2024, which occurred in September 2024. At that time, depending upon long-service terms, at least 33% of the units vested. The remaining awards vest upon continued employment over specified periods of time. Please refer to Note 1 for accelerated vesting requirements. 54 54 54 Table of Contents Table of Contents The following table summarizes RSU transactions during 2024: Number ofUnits(in 000's)Weighted-AverageGrant Date FairValueOutstanding at the end of 20233,045 $405.63 Granted1,677 547.26 Vested and delivered(1,895)432.40 Forfeited(80)457.54 Special cash dividend52 N/AOutstanding at the end of 20242,799 $463.24 The weighted-average grant date fair value of RSUs granted was $547.26, $471.47, and $476.06 in 2024, 2023, and 2022. The remaining unrecognized compensation cost related to non-vested RSUs at the end of 2024 was $848 and the weighted-average period of time over which this cost will be recognized is 1.6 years. Included in the outstanding balance at the end of 2024 were approximately 908,000 RSUs vested but not yet delivered. Summary of Stock-Based Compensation The following table summarizes stock-based compensation expense and the related tax benefits: 202420232022Stock-based compensation expense$818 $774 $724 Less recognized income tax benefit 173 163 154 Stock-based compensation expense, net$645 $611 $570 Less recognized income tax benefit --- ## Modified: Note 6 - Equity **Key changes:** - Reworded sentence: "Dividends 53 53 53 Table of Contents Table of Contents Cash dividends declared in 2024 totaled $8,589 or $19.36 per share, as compared to $1,703 or $3.84 per share in 2023." - Reworded sentence: "As of the end of 2024, the remaining amount available under the authorization was $2,865." **Prior (2023):** Dividends Cash dividends declared in 2023 totaled $3.84 per share, as compared to $3.38 in 2022. The Company's current quarterly dividend rate is $1.02 per share. Stock Repurchase Programs The Company's stock repurchase program is conducted under a $4,000 authorization by the Board of Directors, which expires in January 2027. As of the end of 2023, the remaining amount available under the authorization was $3,563. The following table summarizes the Company's stock repurchase activity: SharesRepurchased(000's)AveragePrice perShareTotal Cost20231,341 $504.68 $677 2022863 511.46 442 20211,358 364.39 495 These amounts may differ from repurchases of common stock in the consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of each fiscal year. Purchases are made 51 51 51 Table of Contents Table of Contents from time to time, as conditions warrant, in the open market or in block purchases and pursuant to plans under SEC Rule 10b5-1. **Current (2024):** Dividends 53 53 53 Table of Contents Table of Contents Cash dividends declared in 2024 totaled $8,589 or $19.36 per share, as compared to $1,703 or $3.84 per share in 2023. Dividends in 2024 included a special dividend of $15 per share, resulting in a payment of approximately $6,655. The Company's current quarterly dividend rate is $1.16 per share. Stock Repurchase Programs The Company's stock repurchase program is conducted under a $4,000 authorization by the Board of Directors, which expires in January 2027. As of the end of 2024, the remaining amount available under the authorization was $2,865. The following table summarizes the Company's stock repurchase activity: SharesRepurchased(000's)AveragePrice perShareTotal Cost20241,004 $695.29 $698 20231,341 504.68 677 2022863 511.46 442 These amounts may differ from repurchases of common stock in the consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of each fiscal year. Purchases are made from time to time, as conditions warrant, in the open market or in block purchases and pursuant to plans under SEC Rule 10b5-1. --- ## Modified: INDEX TO CONSOLIDATED FINANCIAL STATEMENTS **Key changes:** - Reworded sentence: "PageReports of Independent Registered Public Accounting Firm33Consolidated Statements of Income36Consolidated Statements of Comprehensive Income37Consolidated Balance Sheets38Consolidated Statements of Equity39Consolidated Statements of Cash Flows40Notes to Consolidated Financial Statements41 Reports of Independent Registered Public Accounting Firm 33 Consolidated Statements of Income 36 Consolidated Statements of Comprehensive Income 37 Consolidated Balance Sheets 38 Consolidated Statements of Equity 39 Consolidated Statements of Cash Flows 40 Notes to Consolidated Financial Statements 41 32 32 32 Table of Contents Table of Contents" **Prior (2023):** PageReports of Independent Registered Public Accounting Firm31Consolidated Statements of Income34Consolidated Statements of Comprehensive Income35Consolidated Balance Sheets36Consolidated Statements of Equity37Consolidated Statements of Cash Flows38Notes to Consolidated Financial Statements39 Reports of Independent Registered Public Accounting Firm 31 Consolidated Statements of Income 34 Consolidated Statements of Comprehensive Income 35 Consolidated Balance Sheets 36 Consolidated Statements of Equity 37 Consolidated Statements of Cash Flows 38 Notes to Consolidated Financial Statements 39 30 30 30 Table of Contents Table of Contents **Current (2024):** PageReports of Independent Registered Public Accounting Firm33Consolidated Statements of Income36Consolidated Statements of Comprehensive Income37Consolidated Balance Sheets38Consolidated Statements of Equity39Consolidated Statements of Cash Flows40Notes to Consolidated Financial Statements41 Reports of Independent Registered Public Accounting Firm 33 Consolidated Statements of Income 36 Consolidated Statements of Comprehensive Income 37 Consolidated Balance Sheets 38 Consolidated Statements of Equity 39 Consolidated Statements of Cash Flows 40 Notes to Consolidated Financial Statements 41 32 32 32 Table of Contents Table of Contents --- ## Modified: (amounts in millions, except par value and share data) **Key changes:** - Reworded sentence: "September 1,2024September 3,2023ASSETSCURRENT ASSETSCash and cash equivalents$9,906 $13,700 Short-term investments1,238 1,534 Receivables, net2,721 2,285 Merchandise inventories18,647 16,651 Other current assets1,734 1,709 Total current assets34,246 35,879 OTHER ASSETSProperty and equipment, net29,032 26,684 Operating lease right-of-use assets2,617 2,713 Other long-term assets3,936 3,718 TOTAL ASSETS$69,831 $68,994 LIABILITIES AND EQUITYCURRENT LIABILITIESAccounts payable$19,421 $17,483 Accrued salaries and benefits4,794 4,278 Accrued member rewards2,435 2,150 Deferred membership fees2,501 2,337 Current portion of long-term debt103 1,081 Other current liabilities6,210 6,254 Total current liabilities35,464 33,583 OTHER LIABILITIESLong-term debt, excluding current portion5,794 5,377 Long-term operating lease liabilities2,375 2,426 Other long-term liabilities2,576 2,550 TOTAL LIABILITIES46,209 43,936 COMMITMENTS AND CONTINGENCIESEQUITYPreferred stock $0.005 par value; 100,000,000 shares authorized; no shares issued and outstanding - - Common stock $0.005 par value; 900,000,000 shares authorized; 443,126,000 and 442,793,000 shares issued and outstanding2 2 Additional paid-in capital7,829 7,340 Accumulated other comprehensive loss(1,828)(1,805)Retained earnings17,619 19,521 TOTAL EQUITY23,622 25,058 TOTAL LIABILITIES AND EQUITY$69,831 $68,994 Preferred stock $0.005 par value; 100,000,000 shares authorized; no shares issued and outstanding Common stock $0.005 par value; 900,000,000 shares authorized; 443,126,000 and 442,793,000 shares issued and outstanding The accompanying notes are an integral part of these consolidated financial statements.38 The accompanying notes are an integral part of these consolidated financial statements.38 The accompanying notes are an integral part of these consolidated financial statements." **Prior (2023):** September 3,2023August 28,2022ASSETSCURRENT ASSETSCash and cash equivalents$13,700 $10,203 Short-term investments1,534 846 Receivables, net2,285 2,241 Merchandise inventories16,651 17,907 Other current assets1,709 1,499 Total current assets35,879 32,696 OTHER ASSETSProperty and equipment, net26,684 24,646 Operating lease right-of-use assets2,713 2,774 Other long-term assets3,718 4,050 TOTAL ASSETS$68,994 $64,166 LIABILITIES AND EQUITYCURRENT LIABILITIESAccounts payable$17,483 $17,848 Accrued salaries and benefits4,278 4,381 Accrued member rewards2,150 1,911 Deferred membership fees2,337 2,174 Current portion of long-term debt1,081 73 Other current liabilities6,254 5,611 Total current liabilities33,583 31,998 OTHER LIABILITIESLong-term debt, excluding current portion5,377 6,484 Long-term operating lease liabilities2,426 2,482 Other long-term liabilities2,550 2,555 TOTAL LIABILITIES43,936 43,519 COMMITMENTS AND CONTINGENCIESEQUITYPreferred stock $0.005 par value; 100,000,000 shares authorized; no shares issued and outstanding - - Common stock $0.005 par value; 900,000,000 shares authorized; 442,793,000 and 442,664,000 shares issued and outstanding2 2 Additional paid-in capital7,340 6,884 Accumulated other comprehensive loss(1,805)(1,829)Retained earnings19,521 15,585 Total Costco stockholders' equity25,058 20,642 Noncontrolling interests - 5 TOTAL EQUITY25,058 20,647 TOTAL LIABILITIES AND EQUITY$68,994 $64,166 Preferred stock $0.005 par value; 100,000,000 shares authorized; no shares issued and outstanding Common stock $0.005 par value; 900,000,000 shares authorized; 442,793,000 and 442,664,000 shares issued and outstanding The accompanying notes are an integral part of these consolidated financial statements.36 The accompanying notes are an integral part of these consolidated financial statements.36 The accompanying notes are an integral part of these consolidated financial statements. 36 Table of Contents Table of Contents **Current (2024):** September 1,2024September 3,2023ASSETSCURRENT ASSETSCash and cash equivalents$9,906 $13,700 Short-term investments1,238 1,534 Receivables, net2,721 2,285 Merchandise inventories18,647 16,651 Other current assets1,734 1,709 Total current assets34,246 35,879 OTHER ASSETSProperty and equipment, net29,032 26,684 Operating lease right-of-use assets2,617 2,713 Other long-term assets3,936 3,718 TOTAL ASSETS$69,831 $68,994 LIABILITIES AND EQUITYCURRENT LIABILITIESAccounts payable$19,421 $17,483 Accrued salaries and benefits4,794 4,278 Accrued member rewards2,435 2,150 Deferred membership fees2,501 2,337 Current portion of long-term debt103 1,081 Other current liabilities6,210 6,254 Total current liabilities35,464 33,583 OTHER LIABILITIESLong-term debt, excluding current portion5,794 5,377 Long-term operating lease liabilities2,375 2,426 Other long-term liabilities2,576 2,550 TOTAL LIABILITIES46,209 43,936 COMMITMENTS AND CONTINGENCIESEQUITYPreferred stock $0.005 par value; 100,000,000 shares authorized; no shares issued and outstanding - - Common stock $0.005 par value; 900,000,000 shares authorized; 443,126,000 and 442,793,000 shares issued and outstanding2 2 Additional paid-in capital7,829 7,340 Accumulated other comprehensive loss(1,828)(1,805)Retained earnings17,619 19,521 TOTAL EQUITY23,622 25,058 TOTAL LIABILITIES AND EQUITY$69,831 $68,994 Preferred stock $0.005 par value; 100,000,000 shares authorized; no shares issued and outstanding Common stock $0.005 par value; 900,000,000 shares authorized; 443,126,000 and 442,793,000 shares issued and outstanding The accompanying notes are an integral part of these consolidated financial statements.38 The accompanying notes are an integral part of these consolidated financial statements.38 The accompanying notes are an integral part of these consolidated financial statements. 38 Table of Contents Table of Contents --- ## Modified: Note 10 - Commitments and Contingencies **Key changes:** - Reworded sentence: "In accordance with accounting guidance, the Company establishes an accrual for legal proceedings if and when those matters present loss contingencies that are both probable and 58 58 58 Table of Contents Table of Contents reasonably estimable." - Reworded sentence: "The Company has recorded immaterial accruals with respect to certain matters described below, in addition to other immaterial accruals for matters not described below." - Reworded sentence: "In November 2023, a former employee filed a class action against the Company alleging claims under California law for failure to pay minimum wage, failure to pay overtime, failure to provide meal and rest breaks, failure to provide accurate wage statements, failure to reimburse expenses, failure to pay wages when due, and failure to pay sick pay." - Reworded sentence: "2:23-cv-07904; E.D.N.Y.)." - Reworded sentence: "On September 7, 2021, the same plaintiff filed a separate representative action under the California Private Attorneys General Act, asserting the same Labor Code violations and seeking civil penalties and attorneys' fees." **Prior (2023):** Legal Proceedings The Company is involved in many claims, proceedings and litigations arising from its business and property ownership. In accordance with applicable accounting guidance, the Company establishes an accrual for legal proceedings if and when those matters present loss contingencies that are both probable and reasonably estimable. There may be losses in excess of amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss (taking into account where applicable indemnification arrangements concerning suppliers and insurers) and the accrued amount, if any, thereof, and adjusts the amount as appropriate. The Company has recorded immaterial accruals with 55 55 55 Table of Contents Table of Contents respect to certain matters described below, in addition to other immaterial accruals for matters not described below. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but monitors for developments that make the contingency both probable and reasonably estimable. In each case, there is a reasonable possibility that a loss may be incurred, including a loss in excess of the applicable accrual. For matters where no accrual has been recorded, the possible loss or range of loss (including any loss in excess of the accrual) cannot, in the Company's view, be reasonably estimated because, among other things: the remedies or penalties sought are indeterminate or unspecified; the legal and/or factual theories are not well developed; and/or the matters involve complex or novel legal theories or a large number of parties. The Company is a defendant in an action commenced in July 2013 under the California Labor Code Private Attorneys General Act (PAGA) alleging violation of California Wage Order 7-2001 for failing to provide seating to employees who work at entrance and exit doors in California warehouses. Canela v. Costco Wholesale Corp. (Case No. 2013-1-CV-248813; Santa Clara Superior Court). The complaint sought relief under the California Labor Code, including civil penalties and attorneys' fees. On April 26, 2023, the court entered a final judgment in favor of the Company. The plaintiff appealed the judgment in June 2023. In June 2022, a business center employee raised similar claims, alleging failure to provide seating to employees who work at membership refund desks in California warehouses and business centers. Rodriguez v. Costco Wholesale Corp. (Case No. 22CV012847; Alameda Superior Court). The complaint seeks relief under the California Labor Code, including civil penalties and attorneys' fees. The Company filed an answer denying the material allegations of the complaint. In March 2019, employees filed a class action against the Company alleging claims under California law for failure to pay overtime, to provide meal and rest periods and itemized wage statements, to timely pay wages due to terminating employees, to pay minimum wages, and for unfair business practices. Relief was sought under the California Labor Code, including civil penalties and attorneys' fees. Nevarez v. Costco Wholesale Corp. (Case No. 2:19-cv-03454; C.D. Cal.). The Company filed an answer denying the material allegations of the complaint. In December 2019, the court issued an order denying class certification. In January 2020, the plaintiffs dismissed their Labor Code claims without prejudice, and the court remanded the action to state court. Settlement for an immaterial amount was agreed upon in February 2021. Final court approval of the settlement was granted on May 3, 2022. A proposed intervenor appealed the denial of her motion to intervene, and the appeal was dismissed on February 15, 2023. In May 2019, an employee filed a class action against the Company alleging claims under California law for failure to pay overtime, to provide itemized wage statements, to timely pay wages due to terminating employees, to pay minimum wages, and for unfair business practices. Rough v. Costco Wholesale Corp. (Case No. 2:19-cv-01340; E.D. Cal.). Relief is sought under the California Labor Code, including civil penalties and attorneys' fees. In September 2021, the court granted the Company's motion for partial summary judgment and denied class certification. In August 2019, the plaintiff filed a companion case in state court seeking penalties under PAGA. Rough v. Costco Wholesale Corp. (Case No. FCS053454; Sonoma County Superior Court). Relief is sought under the California Labor Code, including civil penalties and attorneys' fees. The state court action has been stayed pending resolution of the federal action. In September 2023 the parties reached an agreement in principle on a settlement for an immaterial amount. In December 2020, a former employee filed suit against the Company asserting collective and class claims on behalf of non-exempt employees under the Fair Labor Standards Act and New York Labor Law for failure to pay for all hours worked, failure to pay certain non-exempt employees on a weekly basis, and failure to provide proper wage statements and notices. The plaintiff also asserted individual retaliation claims. Cappadora v. Costco Wholesale Corp. (Case No. 1:20-cv-06067; E.D.N.Y.). Based on an agreement in principle concerning settlement of the matter, involving a proposed payment by the Company of an immaterial amount, the federal action has been dismissed. In April 2022, Cappadora and a second plaintiff filed an action against the Company in New York state court, asserting the same class 56 56 56 Table of Contents Table of Contents claims asserted in the federal action under the New York Labor Law and seeking preliminary approval of the class settlement. Cappadora and Sancho v. Costco Wholesale Corp. (Index No. 604757/2022; Nassau County Supreme Court). Following final approval of the settlement, the case was dismissed on April 14, 2023. In August 2021, a former employee filed a similar suit, asserting class claims on behalf of certain non-exempt employees under New York Labor Law for failure to pay on a weekly basis. Umadat v. Costco Wholesale Corp. (Case No. 2:21-cv-4814; E.D.N.Y.). The Company filed an answer, denying the material allegations of the complaint. In August 2023, the parties reached an agreement in principle on a settlement for an immaterial amount. In April 2022, a former employee filed a similar suit, asserting class claims on behalf of certain non-exempt employees under New York Labor Law, as well as under the Fair Labor Standards Act, for failure to pay on a weekly basis and failure to pay overtime. Burian v. Costco Wholesale Corp. (Case No. 2:22-cv-02108; E.D.N.Y.). The case was settled for an immaterial amount and was dismissed with prejudice in May 2023. In February 2021, a former employee filed a class action against the Company alleging violations of California Labor Code regarding payment of wages, meal and rest periods, wage statements, reimbursement of expenses, payment of final wages to terminated employees, and for unfair business practices. Edwards v. Costco Wholesale Corp. (Case No. 5:21-cv-00716: C.D. Cal.). On September 27, 2022, the parties reached a settlement for an immaterial amount, which is subject to court approval. In July 2021, a former temporary staffing employee filed a class action against the Company and a staffing company alleging violations of the California Labor Code regarding payment of wages, meal and rest periods, wage statements, the timeliness of wages and final wages, and for unfair business practices. Dimas v. Costco Wholesale Corp. (Case No. STK-CV-UOE-2021-0006024; San Joaquin Superior Court). The Company has moved to compel arbitration of the plaintiff's individual claims and to dismiss the class action complaint. On September 7, 2021, the same plaintiff filed a separate representative action under PAGA, asserting the same Labor Code violations and seeking civil penalties and attorneys' fees. The case has been stayed pending arbitration of the plaintiff's individual claims. In September 2021, an employee filed a class action against the Company alleging violations of the California Labor Code regarding failure to provide sick pay, failure to timely pay wages due at separation from employment, and for violations of California's unfair competition law. De Benning v. Costco Wholesale Corp. (Case No. 34-2021-00309030-CU-OE-GDS; Sacramento Superior Court). In April 2022, a settlement for an immaterial amount was agreed upon, subject to court approval. Final approval of the settlement was granted on February 10, 2023. In March 2022, an employee filed a class action against the Company alleging violations of the California Labor Code regarding the failure to: pay wages, provide meal and rest periods, provide accurate wage statements, timely pay final wages, and reimburse business expenses. Diaz v. Costco Wholesale Corp. (Case No. 22STCV09513; Los Angeles Superior Court). In December 2022, the case was settled for an immaterial amount, and the case was dismissed. In May 2022, an employee filed a PAGA action against the Company alleging claims under the California Labor Code regarding the payment of wages, meal and rest periods, the timeliness of wages and final wages, wage statements, accurate records and business expenses. Gonzalez v. Costco Wholesale Corp. (Case No. 22AHCV00255; Los Angeles Superior Court). The Company filed an answer denying the allegations. Beginning in December 2017, the United States Judicial Panel on Multidistrict Litigation consolidated numerous cases concerning the impacts of opioid abuses filed against various defendants by counties, cities, hospitals, Native American tribes, third-party payors, and others. In re National Prescription Opiate Litigation (MDL No. 2804) (N.D. Ohio). Included are cases filed against the Company by counties and cities in Michigan, New Jersey, Oregon, Virginia and South Carolina, a third-party payor in Ohio, and a hospital in Texas, class actions filed on behalf of infants born with opioid-related medical conditions in 40 states, and class actions and individual actions filed on behalf of individuals seeking to recover alleged 57 57 57 Table of Contents Table of Contents increased insurance costs associated with opioid abuse in 43 states and American Samoa. Claims against the Company filed in federal court outside the MDL have been asserted by certain counties and cities in Florida and Georgia; claims filed by certain cities and counties in New York are pending in state court. Claims against the Company in state courts in New Jersey, Oklahoma, Utah, and Arizona have been dismissed. The Company is defending all of the pending matters. Members of the Board of Directors, six corporate officers and the Company were defendants in a shareholder derivative action filed in June 2022 related to chicken welfare and alleged breaches of fiduciary duties. Smith, et ano. v. Vachris, et al., Superior Court of the State of Washington, County of King, No, 22-2-08937-7SEA. The complaint sought from the individual defendants' damages, injunctive relief, costs, and attorneys' fees. On March 28, 2023, the court granted the defendants' motion to dismiss the action. The plaintiffs subsequently made a demand that the Board of Directors take various actions, including among other things, pursuing claims against directors and officers of the type asserted in the litigation. A demand review committee of the Board has been appointed to make a recommendation to the Board as to the demand. In February 2023, Go Green Norcal, LLC filed an arbitration demand against the Company. The demand alleged a breach of a supply agreement and sought unspecified damages and cancellation of a loan from the Company. In March 2023, the Company filed its answer, denying any breach by the Company, along with counterclaims against Go Green and an affiliate for breach of contract, negligent misrepresentation, and an accounting. In August 2023 the plaintiff asserted that its damages exceed $70 million. In January 2023 the Company received a Civil Investigative Demand from the U.S. Attorney's Office, Western District of Washington, requesting documents. The government is conducting a False Claims Act investigation concerning whether the Company presented or caused to be presented to the federal government for payment false claims relating to prescription medications. The Company does not believe that any pending claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Company's financial position, results of operations or cash flows; it is possible that an unfavorable outcome of some or all of the matters, however unlikely, could result in a charge that might be material to the results of an individual fiscal quarter or year. 58 58 58 Table of Contents Table of Contents **Current (2024):** Legal Proceedings The Company is involved in many claims, proceedings and litigations arising from its business and property ownership. In accordance with accounting guidance, the Company establishes an accrual for legal proceedings if and when those matters present loss contingencies that are both probable and 58 58 58 Table of Contents Table of Contents reasonably estimable. There may be actual losses in excess of amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss (taking into account where applicable indemnification arrangements concerning suppliers and insurers) and the accrued amount, if any, thereof, and adjusts the amount as appropriate. The Company has recorded immaterial accruals with respect to certain matters described below, in addition to other immaterial accruals for matters not described below. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but monitors for developments that make the contingency both probable and reasonably estimable. In each case, there is a reasonable possibility that a loss may be incurred, including a loss in excess of the applicable accrual. For matters where no accrual has been recorded, the possible loss or range of loss (including any loss in excess of the accrual) cannot, in the Company's view, be reasonably estimated because, among other things: the remedies or penalties sought are indeterminate or unspecified; the legal and/or factual theories are not well developed; and/or the matters involve complex or novel legal theories or a large number of parties. In November 2023, a former employee filed a class action against the Company alleging claims under California law for failure to pay minimum wage, failure to pay overtime, failure to provide meal and rest breaks, failure to provide accurate wage statements, failure to reimburse expenses, failure to pay wages when due, and failure to pay sick pay. Martin Reyes v. Costco Wholesale Corporation, Sacramento County Superior Court (Case No. 23cv011351), removed to federal court, Case No. 2:24-cv-00300 (E.D. Cal.). A second amended complaint was filed, which the Company has moved to dismiss. In January 2024, the same plaintiff filed a related Private Attorneys General Act (PAGA) representative action, seeking civil penalties and asserting the same alleged underlying Labor Code violations and an additional suitable seating claim. In May 2024, the plaintiff filed an amended PAGA complaint; the Company has denied the material allegations of the complaint and filed a motion to stay the action. In October 2023, current and former employees filed suit against the Company asserting collective and class claims on behalf of all "Junior Managers" under the Fair Labor Standards Act and New York Labor Law, for failure to pay overtime compensation and for inaccurate wage statements under New York law. Lock et al. v. Costco Wholesale Corp. (Case No. 2:23-cv-07904; E.D.N.Y.). On February 1, 2024, the Company served a motion to dismiss the inaccurate wage-statement claim. On April 5, 2024, plaintiffs filed a motion for conditional certification under the Act, which the Company has opposed. In July 2021, a former temporary staffing employee filed a class action against the Company and a staffing company, alleging violations of the California Labor Code regarding payment of wages, meal and rest periods, wage statements, the timeliness of wages and final wages, and for unfair business practices. Dimas v. Costco Wholesale Corp. (Case No. STK-CV-UOE-2021-0006024; San Joaquin Superior Court). The Company has moved to compel arbitration of the plaintiff's individual claims and to dismiss the class action complaint. On September 7, 2021, the same plaintiff filed a separate representative action under the California Private Attorneys General Act, asserting the same Labor Code violations and seeking civil penalties and attorneys' fees. The case has been stayed pending arbitration of the plaintiff's individual claims. In May 2022, an employee filed an action under PAGA against the Company, alleging claims under the California Labor Code regarding the payment of wages, meal and rest periods, the timeliness of wages and final wages, wage statements, accurate records and business expenses. Gonzalez v. Costco Wholesale Corp. (Case No. 22AHCV00255; Los Angeles Superior Court). The Company filed an answer denying the allegations. On October 31, 2023, a settlement was reached for an immaterial amount. Preliminary approval of the settlement was given in July, and a hearing for final approval has been set for October. In August 2024, an employee filed an action under PAGA against the Company, alleging claims for penalties for alleged violations of the California Labor Code regarding: off-the-clock work, incorrect and untimely payment of wages, meal and rest periods, reimbursement of expenses, non-compliant wage statements, payment of final wages, incorrect rates for sick pay, meal and rest premiums and vacation 59 59 59 Table of Contents Table of Contents pay and reimbursement of expenses. Nader v. Costco (Case No. CV-24-006198; Stanislaus County Superior Court). The Company has not yet responded to the complaint. Beginning in December 2017, the United States Judicial Panel on Multidistrict Litigation consolidated numerous cases concerning the impacts of opioid abuses filed against various defendants by counties, cities, hospitals, Native American tribes, third-party payors, and others. In re National Prescription Opiate Litigation (MDL No. 2804) (N.D. Ohio). Included are cases filed against the Company by counties and cities in Michigan, New Jersey, Oregon, Virginia and South Carolina, a third-party payor in Ohio, and a hospital in Texas, class actions filed on behalf of infants born with opioid-related medical conditions in 40 states, and class actions and individual actions filed on behalf of individuals seeking to recover alleged increased insurance costs associated with opioid abuse in 43 states and American Samoa. Claims against the Company filed in federal court outside the MDL have been asserted by certain counties and cities in Florida and Georgia; claims filed by certain cities and counties in New York are pending in state court. Claims against the Company in state courts in New Jersey, Oklahoma, Utah, and Arizona have been dismissed. The Company is defending all of the pending matters. In October 2021 the Company received a notice that the Quebec Health Insurance Board had commenced an inquiry to determine whether the Company had given or received improper payments for drugs that are covered by the province's prescription drug program from drug wholesalers, generic drug manufacturers or the independent pharmacist who owns and operates the pharmacies located in the Company's Quebec locations. The inquiry covers a period beginning January 1, 2017. In August 2024 the Board made a demand of an immaterial amount. The Company is a named defendant in four bodily injury actions relating to its sale of Real Water, an alkalized water previously sold at the Company and other retailers. Kaveh et al. v. Costco Wholesale Corp. et al., Case No. A23-864391-B, District Court, Clark County, NV Wei, et al. v. Costco Wholesale Corp. et al. Case No. A-22-856147-B, District Court, Clark County, NV Henry et al. v. Costco Wholesale Corp. et al., Case No. A21844176-B, District Court, Clark County, NV Lampman et al. vs. Costco Wholesale Corp. et al. Case No. A-23-868638-C, District Court, Clark County, NV. The plaintiffs allegedly sustained liver or other bodily damage as a result of consuming the product, and seek compensatory and punitive damages from all defendants, which include the manufacturer, distributors, testing equipment makers and retailers. The Kaveh case is set for trial on March 17, 2025. Wei and Henry have been consolidated with Brown. et al., vs. AffinityLifestyles.com, Inc., et al., Case No. A-21-831776-B, District Court, Clark County, NV. The Company is not a named defendant in Brown. Wei/Henry/Brown is set for trial starting October 7, 2024. Between September 25, 2023, and October 31, 2023, five class action suits were filed against the Company alleging various privacy law violations stemming from pixel trackers on Costco.com: Birdwell v. Costco Wholesale Corp., Case No. T23-1405, Contra Costa County Superior Court; and Scott v. Costco Wholesale Corp., Case No. 2:23-cv-08808 (C.D. Cal.), now consolidated with R.S. v. Costco Wholesale Corp., Case No. 2:23-cv-01628 (W.D. Wash.); Groves, et ano. v. Costco Wholesale Corp., Case No. 2:23-cv-01662 (W.D. Wash.), and Castillo v. Costco Wholesale Corp., under Case No. 2:34-cv-01548 (W.D. Wash.). The Castillo plaintiffs filed a consolidated complaint on January 26, 2024, which seeks damages, equitable relief and attorneys' fees under various statutes, including the Washington Consumer Protection Act, Washington Privacy Act, Washington Uniform Health Care Information Act, Electronic Communications Privacy Act, California Invasion of Privacy Act, and California Confidentiality of Medical Information Act. The consolidated complaint also alleges breach of implied contract, invasion of privacy, conversion, and unjust enrichment. The Company filed a motion to dismiss the Castillo complaint on March 11, 2024. In Birdwell, the Company filed a motion to dismiss and demurrer on January 22, 2024. On May 5, 2024, the Birdwell Court granted the demurrer with leave to amend and requested additional briefing on whether the case should be stayed in favor of Castillo. On May 16, 2024, the parties stipulated to stay Birdwell pending resolution of Castillo. On January 2, and August 22, 2024, the Company received related civil investigative demands from the Washington Attorney General's Office. On January 3, 2024, the Company received a related pre-litigation letter from the Los Angeles Office of the County Counsel. The Company is in the process of responding to both agencies. 60 60 60 Table of Contents Table of Contents On June 20, 2024, a class action lawsuit was filed against the Company and Nice-Pak Products, Inc., alleging that Kirkland Signature Fragrance Free Baby Wipes contain 3.7 parts per billion of per-and polyfluoroalkyl substances. The complaint alleges that the label claim that the wipes are "made with naturally derived ingredients" thus violates various state consumer protection and false advertising laws. The complaint seeks unspecified damages, including punitive damages, as well as equitable relief and attorneys' fees and costs. The defendants filed a motion to dismiss on August 9, 2024. Bullard, et ano., v. Costco Wholesale Corp., et ano., No. 3:24-cv-03714 (N.D. Cal.). In January 2023 the Company received a Civil Investigative Demand from the U.S. Attorney's Office, Western District of Washington, requesting documents. The government is conducting a False Claims Act investigation concerning whether the Company presented or caused to be presented to the federal government for payment false claims relating to prescription medications. In May 2024 the Company received a Notice of Intent to File Administrative Complaint for Violations of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) from the U.S. Environmental Protection Agency. The EPA is seeking administrative fines for importation, sale and distribution of misbranded devices and unregistered products the government asserts are pesticides under FIFRA. The Company does not believe that any pending claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Company's financial position, results of operations or cash flows; it is possible that an unfavorable outcome of some or all of the matters, however unlikely, could result in a charge that might be material to the results of an individual fiscal quarter or year. 61 61 61 Table of Contents Table of Contents --- ## Modified: RESULTS OF OPERATIONS **Key changes:** - Reworded sentence: "Net Sales 202420232022Net Sales$249,625$237,710$222,730Changes in net sales:U.S.4 %7 %17 %Canada6 %4 %16 %Other International9 %9 %10 %Total Company5 %7 %16 %Changes in comparable sales(1):U.S.4 %3 %16 %Canada7 %2 %15 %Other International8 %3 %7 %Total Company5 %3 %14 %E-commerce16 %(6)%10 %Changes in comparable sales excluding the impact of changes in foreign-currency and gasoline prices(1):U.S.5 %4 %10 %Canada8 %8 %12 %Other International8 %8 %10 %Total Company6 %5 %11 %E-commerce16 %(5)%10 %_______________ Net Sales Changes in net sales: Changes in comparable sales(1): Changes in comparable sales excluding the impact of changes in foreign-currency and gasoline prices(1): (1)Comparable sales for 2024 were calculated using comparable retail weeks." **Prior (2023):** Net Sales 202320222021Net Sales$237,710$222,730$192,052Changes in net sales:U.S.7 %17 %16 %Canada4 %16 %22 %Other International9 %10 %23 %Total Company7 %16 %18 %Changes in comparable sales:U.S.3 %16 %15 %Canada2 %15 %20 %Other International3 %7 %19 %Total Company3 %14 %16 %E-commerce(6)%10 %44 %Changes in comparable sales excluding the impact of changes in foreign-currency and gasoline prices:U.S.4 %10 %14 %Canada8 %12 %12 %Other International8 %10 %13 %Total Company5 %11 %13 %E-commerce(5)%10 %43 % Net Sales Changes in net sales: Changes in comparable sales: Changes in comparable sales excluding the impact of changes in foreign-currency and gasoline prices: Net Sales Net sales increased $14,980 or 7% during 2023. The improvement was attributable to an increase in comparable sales of 3%, sales at new warehouses opened in 2022 and 2023, and one additional week of sales in 2023. Sales increased $12,761, or 7% in core merchandise categories, led by foods and sundries and fresh foods; while non-foods decreased. Sales increased $2,219, or 5% in warehouse ancillary and other businesses, led by pharmacy, food court, and travel. During 2023, changes in foreign currencies relative to the U.S. dollar negatively impacted net sales by approximately $3,484, 156 basis points, compared to 2022, attributable to our Canadian and Other International operations. The volume of gasoline sold increased approximately 7%, positively impacting net sales by $2,148, or 96 basis points. Lower gasoline prices negatively impacted net sales by $1,592, or 71 basis points, compared to 2022, with a 6% decrease in the average price per gallon. Comparable Sales Comparable sales increased 3% during 2023 and were positively impacted by increases in shopping frequency, partially offset by a decrease in average ticket. **Current (2024):** Net Sales 202420232022Net Sales$249,625$237,710$222,730Changes in net sales:U.S.4 %7 %17 %Canada6 %4 %16 %Other International9 %9 %10 %Total Company5 %7 %16 %Changes in comparable sales(1):U.S.4 %3 %16 %Canada7 %2 %15 %Other International8 %3 %7 %Total Company5 %3 %14 %E-commerce16 %(6)%10 %Changes in comparable sales excluding the impact of changes in foreign-currency and gasoline prices(1):U.S.5 %4 %10 %Canada8 %8 %12 %Other International8 %8 %10 %Total Company6 %5 %11 %E-commerce16 %(5)%10 %_______________ Net Sales Changes in net sales: Changes in comparable sales(1): Changes in comparable sales excluding the impact of changes in foreign-currency and gasoline prices(1): (1)Comparable sales for 2024 were calculated using comparable retail weeks. Net Sales Net sales increased $11,915 or 5% during 2024. The improvement was attributable to an increase in comparable sales and sales at new warehouses opened in 2023 and 2024, partially offset by the impact of one less week of sales in 2024. Sales increased $10,639, or 6% in core merchandise categories, increasing in all categories. Sales increased $1,276, or 3% in warehouse ancillary and other businesses, led by pharmacy, partially offset by a decrease in gasoline. During 2024, the volume of gasoline sold increased approximately 1%, positively impacting net sales by $400, or 17 basis points, which includes the impact of one less week of sales in 2024. Lower gasoline prices negatively impacted net sales by $917, or 39 basis points, compared to 2023, with a 3% decrease in the average price per gallon. Changes in foreign currencies relative to the U.S. dollar negatively impacted net sales by approximately $474, 20 basis points, compared to 2023, attributable to our Canadian and Other International operations. Comparable Sales Comparable sales increased 5% during 2024 and were positively impacted by an increase in shopping frequency, partially offset by a slight decrease in average ticket. 25 25 25 Table of Contents Table of Contents --- ## Modified: Cash Flows from Financing Activities **Key changes:** - Reworded sentence: "Net cash used in financing activities totaled $10,764 in 2024, compared to $2,614 in 2023." - Reworded sentence: "The remaining amount available to be purchased under our approved plan was $2,865 at the end of 2024." **Prior (2023):** Net cash used in financing activities totaled $2,614 in 2023, compared to $4,283 in 2022. Cash flows used in financing activities primarily related to the payment of dividends, repurchases of common stock, and withholding taxes on stock-based awards. In 2022, cash flow used in financing activities included 26 26 26 Table of Contents Table of Contents payments to our former joint-venture partner for a dividend and the purchase of their equity interest in Taiwan, totaling $1,050 in the aggregate, and repayments of our 2.300% Senior Notes. Stock Repurchase Programs On January 19, 2023, the Board of Directors authorized a new share repurchase program in the amount of $4,000, which expires in January 2027. During 2023 and 2022, we repurchased 1,341,000 and 863,000 shares of common stock, at average prices of $504.68 and $511.46, totaling approximately $677 and $442. These amounts may differ from the accompanying consolidated statements of cash flows due to changes in unsettled repurchases at the end of each fiscal year. Purchases are made from time to time, as conditions warrant, in the open market or in block purchases, pursuant to plans under SEC Rule 10b5-1. Repurchased shares are retired, in accordance with the Washington Business Corporation Act. The remaining amount available to be purchased under our approved plan was $3,563 at the end of 2023. Dividends Cash dividends declared in 2023 totaled $3.84 per share, as compared to $3.38 per share in 2022. In April 2023, the Board of Directors increased our quarterly cash dividend from $0.90 to $1.02 per share. **Current (2024):** Net cash used in financing activities totaled $10,764 in 2024, compared to $2,614 in 2023. Cash flow used in financing activities primarily related to the payment of dividends, repayments of long-term debt and short-term borrowings, repurchases of common stock, and withholding taxes on stock-based awards. On May 18, 2024, we paid the $1,000 outstanding principal balance on the 2.750% Senior Notes, using cash and cash equivalents and short-term investments. Cash flow provided by financing activities included proceeds from short-term borrowings and four Guaranteed Senior Notes totaling approximately $500, at fixed interest rates ranging from 1.400% to 2.120%, issued by our Japan subsidiary. Dividends Cash dividends declared in 2024 totaled $8,589 or $19.36 per share, as compared to $1,703 or $3.84 per share in 2023. Dividends in 2024 included a special dividend of $15 per share, resulting in a payment of approximately $6,655. In April 2024, the Board of Directors increased our quarterly cash dividend from $1.02 to $1.16 per share. Share Repurchase Program On January 19, 2023, the Board of Directors authorized a share repurchase program in the amount of $4,000, which expires in January 2027. During 2024 and 2023, we repurchased 1,004,000 and 1,341,000 shares of common stock, at an average price per share of $695.29 and $504.68, totaling approximately $698 and $677. These amounts may differ from the accompanying consolidated statements of cash flows due to changes in unsettled repurchases at the end of each fiscal year. Purchases are made from time to time, as conditions warrant, in the open market or in block purchases, pursuant to plans under SEC Rule 10b5-1. Repurchased shares are retired, in accordance with the Washington Business Corporation Act. The remaining amount available to be purchased under our approved plan was $2,865 at the end of 2024. --- ## Modified: Selling, General and Administrative Expenses **Key changes:** - Reworded sentence: "202420232022SG&A expenses$22,810$21,590$19,779SG&A expenses as a percentage of net sales9.14 %9.08 %8.88 % SG&A expenses as a percentage of net sales increased six basis points compared to 2023." **Prior (2023):** 202320222021SG&A expenses$21,590$19,779$18,537SG&A expenses as a percentage of net sales9.08 %8.88 %9.65 % 24 24 24 Table of Contents Table of Contents SG&A expenses as a percentage of net sales increased 20 basis points compared to 2022. SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflation was 9.02%, an increase of 14 basis points. The comparison to last year was negatively impacted by 16 basis points in warehouse operations and other businesses, largely driven by wage increases effective in March and July 2022, and March 2023, as well as lower sales growth. Central operating costs were also higher by six basis points. SG&A was positively impacted by eight basis points due to the prior year's write-off of information technology assets and a charge related to granting our employees additional vacation. Changes in foreign currencies relative to the U.S. dollar decreased SG&A expenses by approximately $281 compared to 2022, attributable to our Canadian and Other International Operations. **Current (2024):** 202420232022SG&A expenses$22,810$21,590$19,779SG&A expenses as a percentage of net sales9.14 %9.08 %8.88 % SG&A expenses as a percentage of net sales increased six basis points compared to 2023. SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflation was 9.10%, an increase of two basis points. The comparison to last year was negatively impacted by two basis points in warehouse operations and other businesses, driven by our U.S. operations, which included the impact of wage increases in March and September 2023, and July 2024, partially offset by sales leverage and improved productivity. SG&A expenses as percentage of net sales were lower in our Canadian and Other International operations. --- ## Modified: (amounts in millions, except per share data) **Key changes:** - Reworded sentence: "52 Weeks Ended53 Weeks Ended52 Weeks EndedSeptember 1,2024September 3,2023August 28,2022REVENUENet sales$249,625 $237,710 $222,730 Membership fees4,828 4,580 4,224 Total revenue254,453 242,290 226,954 OPERATING EXPENSESMerchandise costs222,358 212,586 199,382 Selling, general and administrative22,810 21,590 19,779 Operating income9,285 8,114 7,793 OTHER INCOME (EXPENSE)Interest expense(169)(160)(158)Interest income and other, net624 533 205 INCOME BEFORE INCOME TAXES9,740 8,487 7,840 Provision for income taxes2,373 2,195 1,925 Net income including noncontrolling interests7,367 6,292 5,915 Net income attributable to noncontrolling interests - - (71)NET INCOME ATTRIBUTABLE TO COSTCO$7,367 $6,292 $5,844 NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO:Basic$16.59 $14.18 $13.17 Diluted$16.56 $14.16 $13.14 Shares used in calculation (000's)Basic443,914 443,854 443,651 Diluted444,759 444,452 444,757 Net income attributable to noncontrolling interests" **Prior (2023):** 53 Weeks Ended52 Weeks Ended52 Weeks EndedSeptember 3,2023August 28,2022August 29,2021REVENUENet sales$237,710 $222,730 $192,052 Membership fees4,580 4,224 3,877 Total revenue242,290 226,954 195,929 OPERATING EXPENSESMerchandise costs212,586 199,382 170,684 Selling, general and administrative21,590 19,779 18,537 Operating income8,114 7,793 6,708 OTHER INCOME (EXPENSE)Interest expense(160)(158)(171)Interest income and other, net533 205 143 INCOME BEFORE INCOME TAXES8,487 7,840 6,680 Provision for income taxes2,195 1,925 1,601 Net income including noncontrolling interests6,292 5,915 5,079 Net income attributable to noncontrolling interests - (71)(72)NET INCOME ATTRIBUTABLE TO COSTCO$6,292 $5,844 $5,007 NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO:Basic$14.18 $13.17 $11.30 Diluted$14.16 $13.14 $11.27 Shares used in calculation (000's)Basic443,854 443,651 443,089 Diluted444,452 444,757 444,346 Net income attributable to noncontrolling interests **Current (2024):** 52 Weeks Ended53 Weeks Ended52 Weeks EndedSeptember 1,2024September 3,2023August 28,2022REVENUENet sales$249,625 $237,710 $222,730 Membership fees4,828 4,580 4,224 Total revenue254,453 242,290 226,954 OPERATING EXPENSESMerchandise costs222,358 212,586 199,382 Selling, general and administrative22,810 21,590 19,779 Operating income9,285 8,114 7,793 OTHER INCOME (EXPENSE)Interest expense(169)(160)(158)Interest income and other, net624 533 205 INCOME BEFORE INCOME TAXES9,740 8,487 7,840 Provision for income taxes2,373 2,195 1,925 Net income including noncontrolling interests7,367 6,292 5,915 Net income attributable to noncontrolling interests - - (71)NET INCOME ATTRIBUTABLE TO COSTCO$7,367 $6,292 $5,844 NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO:Basic$16.59 $14.18 $13.17 Diluted$16.56 $14.16 $13.14 Shares used in calculation (000's)Basic443,914 443,854 443,651 Diluted444,759 444,452 444,757 Net income attributable to noncontrolling interests --- ## Modified: Issuer Purchases of Equity Securities **Key changes:** - Reworded sentence: "The following table sets forth information on our common stock repurchase activity for the fourth quarter of 2024 (dollars in millions, except per share data): PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Program(1)Maximum Dollar Value of Shares that May Yet be Purchased under the ProgramMay 13 - June 9, 202466,000 $806.79 66,000 $3,026 June 10 - July 7, 202446,000 854.00 46,000 2,987 July 8 - August 4, 202455,000 828.14 55,000 2,941 August 5 - September 1, 202488,000 865.39 88,000 2,865 Total fourth quarter255,000 $840.12 255,000" **Prior (2023):** The following table sets forth information on our common stock repurchase activity for the fourth quarter of 2023 (dollars in millions, except per share data): PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Program(1)Maximum Dollar Value of Shares that May Yet be Purchased under the ProgramMay 8 - June 4, 2023107,000 $498.28 107,000 $3,740 June 5 - July 2, 2023102,000 523.05 102,000 3,687 July 3 - July 30, 202397,000 548.20 97,000 3,634 July 31 - September 3, 2023127,000 550.58 127,000 3,563 Total fourth quarter433,000 $530.67 433,000 **Current (2024):** The following table sets forth information on our common stock repurchase activity for the fourth quarter of 2024 (dollars in millions, except per share data): PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Program(1)Maximum Dollar Value of Shares that May Yet be Purchased under the ProgramMay 13 - June 9, 202466,000 $806.79 66,000 $3,026 June 10 - July 7, 202446,000 854.00 46,000 2,987 July 8 - August 4, 202455,000 828.14 55,000 2,941 August 5 - September 1, 202488,000 865.39 88,000 2,865 Total fourth quarter255,000 $840.12 255,000 --- ## Modified: (amounts in millions) **Key changes:** - Reworded sentence: "52 Weeks Ended53 Weeks Ended52 Weeks Ended September 1,2024September 3,2023August 28,2022NET INCOME INCLUDING NONCONTROLLING INTERESTS$7,367 $6,292 $5,915 Foreign-currency translation adjustment and other, net(23)24 (721)Comprehensive income7,344 6,316 5,194 Less: Comprehensive income attributable to noncontrolling interests - - 36 COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO$7,344 $6,316 $5,158" **Prior (2023):** 53 Weeks Ended52 Weeks Ended52 Weeks Ended September 3,2023August 28,2022August 29,2021NET INCOME INCLUDING NONCONTROLLING INTERESTS$6,292 $5,915 $5,079 Foreign-currency translation adjustment and other, net24 (721)181 Comprehensive income6,316 5,194 5,260 Less: Comprehensive income attributable to noncontrolling interests - 36 93 COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO$6,316 $5,158 $5,167 **Current (2024):** 52 Weeks Ended53 Weeks Ended52 Weeks Ended September 1,2024September 3,2023August 28,2022NET INCOME INCLUDING NONCONTROLLING INTERESTS$7,367 $6,292 $5,915 Foreign-currency translation adjustment and other, net(23)24 (721)Comprehensive income7,344 6,316 5,194 Less: Comprehensive income attributable to noncontrolling interests - - 36 COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO$7,344 $6,316 $5,158 --- ## Modified: Membership Fees **Key changes:** - Reworded sentence: "202420232022Membership fees$4,828$4,580$4,224Membership fees increase5 %8 %9 % Membership fee revenue increased 5% in 2024, driven by new member sign-ups and upgrades to Executive Membership." - Reworded sentence: "Effective September 1, 2024, we increased our membership fees in the U.S." **Prior (2023):** 202320222021Membership fees$4,580$4,224$3,877Membership fees increase8 %9 %9 % 23 23 23 Table of Contents Table of Contents Membership fee revenue increased 8% in 2023, driven by new member sign-ups, upgrades to Executive membership, and the benefit of an additional week. Changes in foreign currencies relative to the U.S. dollar negatively impacted membership fees by $76 compared to 2022. At the end of 2023, our member renewal rates were 92.7% in the U.S. and Canada and 90.4% worldwide. More members auto renewing and higher penetration of Executive members benefit renewal rates. Our renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period. **Current (2024):** 202420232022Membership fees$4,828$4,580$4,224Membership fees increase5 %8 %9 % Membership fee revenue increased 5% in 2024, driven by new member sign-ups and upgrades to Executive Membership. These increases were partially offset by one less week of membership fee income in 2024. At the end of 2024, our member renewal rates were 92.9% in the U.S. and Canada and 90.5% worldwide. Renewal rates benefited from higher penetration of Executive members. Our renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. Effective September 1, 2024, we increased our membership fees in the U.S. and Canada for Gold Star (individual), Business, and Business affiliates to $65 per year. The Executive membership fee increased from $120 to $130 (membership fee of $65, plus Executive upgrade of $65), and the maximum annual 2% reward associated with the Executive Membership increased from $1,000 to $1,250. We account for membership fee revenue on a deferred basis, recognized ratably over one year. We expect these fee changes to increase revenues approximately $370 over the next two years, $190 of which will benefit fiscal 2025, primarily in the latter half of the year. --- ## Modified: Provision for Income Taxes **Key changes:** - Reworded sentence: "202420232022Provision for income taxes$2,373 $2,195 $1,925 Effective tax rate24.4 %25.9 %24.6 % The effective tax rate for 2024 was favorably impacted by discrete tax benefits of $94 related to the portion of the special dividend payable through our 401(k) plan, a net non-recurring tax benefit of $63 related to a transfer pricing settlement and certain true-ups of tax reserves, and $45 of excess tax benefits related to stock compensation." **Prior (2023):** 202320222021Provision for income taxes$2,195 $1,925 $1,601 Effective tax rate25.9 %24.6 %24.0 % The effective tax rate for 2023 was impacted by net discrete tax benefits of $62, primarily due to excess tax benefits related to stock compensation. Excluding discrete net tax benefits, the tax rate was 26.6%. The effective tax rate for 2022 was impacted by net discrete tax benefits of $130, primarily due to excess tax benefits related to stock compensation. Excluding discrete net tax benefits, the tax rate was 26.2%. **Current (2024):** 202420232022Provision for income taxes$2,373 $2,195 $1,925 Effective tax rate24.4 %25.9 %24.6 % The effective tax rate for 2024 was favorably impacted by discrete tax benefits of $94 related to the portion of the special dividend payable through our 401(k) plan, a net non-recurring tax benefit of $63 related to a transfer pricing settlement and certain true-ups of tax reserves, and $45 of excess tax benefits related to stock compensation. The effective tax rate for 2023 was favorably impacted by discrete tax benefits of $54 due to excess tax benefits related to stock compensation. The Organization of Economic Cooperation and Development (OECD) has introduced a framework to implement a global minimum corporate tax of 15% (referred to as Pillar 2) which is effective for fiscal 2025. We will continue to evaluate the impacts of Pillar 2, but do not currently expect a material impact on our consolidated financial statements. 27 27 27 Table of Contents Table of Contents --- ## Modified: Warehouse Properties **Key changes:** - Reworded sentence: "At September 1, 2024, we operated 890 membership warehouses: Own Landand BuildingLease Landand/orBuilding(1)TotalUnited States and Puerto Rico499 115 614 Canada91 17 108 Other International113 55 168 Total703 187 890 Lease Land and/or" **Prior (2023):** At September 3, 2023, we operated 861 membership warehouses: 17 17 17 Table of Contents Table of Contents Own Landand BuildingLease Landand/orBuilding(1)TotalUnited States and Puerto Rico477 114 591 Canada90 17 107 Other International110 53 163 Total677 184 861 Lease Land and/or **Current (2024):** At September 1, 2024, we operated 890 membership warehouses: Own Landand BuildingLease Landand/orBuilding(1)TotalUnited States and Puerto Rico499 115 614 Canada91 17 108 Other International113 55 168 Total703 187 890 Lease Land and/or --- ## Modified: Changes in or failure to comply with environmental, social, or governance (ESG) regulations could adversely impact our business, financial condition and results of operations. **Key changes:** - Reworded sentence: "We are subject to a wide and increasingly broad array of laws and regulations globally relating to ESG matters, including disclosure and compliance requirements." - Added sentence: "Natural gas, diesel fuel, gasoline, and electricity are used in our operations, distribution channels, and value chain." - Added sentence: "Government regulations limiting carbon dioxide and other greenhouse gas emissions and other environmental restrictions may increase compliance, operations, and merchandise costs, and other regulations affecting energy inputs could materially affect our profitability." - Added sentence: "More stringent fuel economy standards, changing public policies aimed at increasing the adoption of zero-emission and alternative fuel vehicles, and other regulations related to climate change may affect our future operations, adversely impact certain elements of our profitability, and require significant capital expenditures." **Prior (2023):** We are subject to a wide and increasingly broad array of federal, state, regional, local and international laws and regulations relating to the use, storage, discharge and disposal of hazardous materials, hazardous and non-hazardous wastes and other environmental matters. Failure to comply with these laws could result in harm to our members, employees or others, significant costs to satisfy environmental compliance, remediation or compensatory requirements, or the imposition of severe penalties or restrictions on operations by governmental agencies or courts that could adversely affect our business, financial condition and results of operations. Operations at our facilities require the treatment and disposal of wastewater, stormwater and agricultural and food processing wastes, the use and maintenance of refrigeration systems, including ammonia-based chillers, noise, odor and dust management, the operation of mechanized processing equipment, and other operations that potentially could affect the environment and public health and safety. Failure to comply with current and future environmental, health and safety standards could result in the imposition of fines and penalties, illness or injury of our employees, and claims or lawsuits related to such illnesses or injuries, and temporary closures or limits on the operations of facilities. **Current (2024):** We are subject to a wide and increasingly broad array of laws and regulations globally relating to ESG matters, including disclosure and compliance requirements. These laws and regulations, along with expanding voluntary reporting, are expanding the scope and complexity of matters that we are required to regulate, assess, and disclose and potentially limit our sourcing flexibility. Failure to comply with these laws could result in harm to our members, employees, workers in the value chain or others, significant costs to satisfy environmental compliance, remediation or compensatory requirements, or the imposition of severe penalties or restrictions on operations by governmental agencies or courts that could adversely affect our business, financial condition and results of operations. Operations at our facilities require the treatment and disposal of wastewater, stormwater and agricultural and food processing wastes, the use and maintenance of refrigeration systems, including ammonia-based chillers, noise, odor and dust management, the operation of mechanized processing equipment, and other operations that potentially could affect the environment and public health and safety. Failure to comply with current and future environmental, health and safety standards could result in the imposition of fines and penalties, illness or injury of our employees, and claims or lawsuits related to such illnesses or injuries, and temporary closures or limits on the operations of facilities. Natural gas, diesel fuel, gasoline, and electricity are used in our operations, distribution channels, and value chain. Government regulations limiting carbon dioxide and other greenhouse gas emissions and other environmental restrictions may increase compliance, operations, and merchandise costs, and other regulations affecting energy inputs could materially affect our profitability. More stringent fuel economy standards, changing public policies aimed at increasing the adoption of zero-emission and alternative fuel vehicles, and other regulations related to climate change may affect our future operations, adversely impact certain elements of our profitability, and require significant capital expenditures. --- *Data sourced from SEC EDGAR. Last updated 2026-06-01.*